Industry calls for radical measures to prevent economic scarring

Government is being urged to bring forward a series of radical policy measures to prevent a permanent ‘scarring’ of the economy as escalating energy, transportation and materials costs continue to impact manufacturers.

Make UK says action on the scale of that seen during the worst points of the pandemic is now needed to help avert a severe recession, potentially substantial insolvencies and job losses in the sector.

Data collected by the group shows that rising energy costs are causing major disruption for half of companies, while one in five believe energy costs will remain an issue for two years.

When combined with the cumulative effect of increases in other expenses such as transport costs, National Insurance Contributions and a proposed increase in Corporation Tax, it says the current situation represents as big a threat to manufacturers as the pandemic, if not greater.

Actions proposed include specific measures on energy, as well as a range of proposals to aid cashflow, provide greater access to labour supply and initiatives to encourage investment, especially in energy efficiency technologies.

“Whilst industry has recovered strongly over the last year, we are clearly heading for very stormy waters in the face of eye watering increases in energy costs and a difficult international environment,” commented Make UK’s chief executive Stephen Phipson. “This threatens to shatter expectations of a sustained recovery from the pandemic.

He said that, given the rate at which companies are “burning through their balance sheets just to survive”, the Government must take “immediate and substantial” measures to help guard firms from the worst impacts of escalating costs and help protect jobs.

“We need a shock and awe suite of proposals to protect viable companies and jobs and we need them now. Manufacturers cannot afford to wait for a functioning Government to get its feet under the table.”

Among the immediate measures being proposed by Make UK are:

• Reduce VAT on business energy bills from 20% to 5%
• Reverse the National Insurance Contributions increased from 2022
• Extend current business reliefs applied to other sectors to manufacturing
• Extend business rates reliefs for both building improvements and eligible plant & machinery
• Introduce a long-term capital allowance regime to spur investment in green technologies and energy efficiency measures to reduce energy consumption
• Make the Annual Investment Allowance permanent
• Undertake a full and fundamental reform of Business Rates
• Commission the Migration Advisory Committee to review and revise the shortage occupation list by early 2023 at the latest