Industry calls for growth boost in Autumn Statement as demand weakens – EEF/BDO survey

North West manufacturers have made a last minute call for a joined up, cross government growth plan ahead of this week’s Autumn Statement, following a survey showing demand continuing to weaken further.

The call was made on the back of the EEF/BDO Q4 Manufacturing Outlook survey published today. According to the survey, sentiment turned negative in both orders and output in the last quarter (both down to a balance of -6% of companies) as the weakening conditions seen through the course of this year finally took their toll. In particular, the continuing crisis in the eurozone impacted heavily as those companies with a greater share of their exports into the EU were most negative.

However, the survey also showed on a more positive note that output and orders are forecast to pick up in the first quarter of next year to a balance of +7% and +13% respectively.

In addition, demand for skilled staff continues with recruitment intentions holding up, with a balance of +6% of companies increasing employment. In the next quarter, the figure is even stronger with a balance of +23% of companies planning to recruit which shows firms should be in a position to take advantage of stronger demand when it picks up

Commenting, EEF North West Region Director, David Ost, said: “We’ve seen growth ebb away during the course of the year and many manufacturers are steeling themselves for a continuation of tough trading conditions in the next few quarters. The weakening of export demand is particularly worrying given the hopes we had placed on trade driving economic growth and rebalancing.”

The extent to which industry confidence has fallen since this year’s Budget makes it ever more urgent for the government to get to grips with growth and get behind companies seeking to invest and succeed in new export markets.

Manufacturers have reiterated their call for a concerted, joined up, cross government growth plan ahead of this week’s Autumn Statement.

Mr Ost continued, “This week the Chancellor must send a strong signal to industry that it is getting a firm grip on the levers of growth. We need to get businesses investing again and the Autumn Statement should prioritise measures to support business investment through the tax system and to increase competition in business banking. But individual measures are on their own are not enough and they should be part of a Growth Plan that demonstrates to business that all of government has a week-in, week-out focus on growth”

Philip Storer, Partner at BDO LLP, said: “A depressing picture of the North West’s manufacturing sector has been painted in this quarter’s survey, for all but a few sectors and companies. The reduction in exports is a particular concern and, whilst this mostly reflects the turmoil in the Eurozone, it also highlights the scale of the challenge in growing exports to emerging markets to offset the downturn in much of Europe.

“On a more positive note, investment intentions seem to be defying gravity but the ongoing issues around access to capital and an unsupportive tax structure may yet have a serious impact on actual investment. This survey shows that the sector is nowhere near where the government wanted it to be two years ago and emphasises the need for a long term industrial policy focused on manufacturing.”

EEF used the survey to re-iterate its call for measures to boost growth and investment in this week’s Autumn Statement. In particular, EEF is calling for the following immediate key measures:

1) Access to Finance
An immediate review of the SME Banking system to include options for switching bank accounts more easily. Government should also use the £1billion currently earmarked for a British Investment Bank to set up a Challenger Bank to the big four.

2) Tax and Investment
A time limited 100% first year capital allowances for two years. The UK current has the least generous capital allowance system of any country in the OECD bar Chile, whilst evidence from similar schemes introduced in the US and Canada has indicated a substantial boost to private sector investment.

3) Infrastructure
A re-allocation of the £5.3bn underspend by government departments in 2011-12 towards investment in infrastructure.

4) Skills
A reduction in National Insurance Contributions for employers investing in higher level Apprenticeships.