South East manufacturers are calling for a seismic emergency Budget tomorrow on the back of a substantial revision downwards of prospects for 2023 in response to the eyewatering increase in energy and other business costs companies are facing.
The revision downwards comes as the Q3 Make UK/BDO Manufacturing Outlook survey, forecasts growth for manufacturing of just 0.6% in 2023, down from 1.7% being forecast as recently as June. Make UK has also slashed its GDP forecasts from 3.6% this year to just 0.3% in 2023.
In the last quarter, the performance of manufacturers in the South East held up well compared to the national picture. This is reflected in the strength of the food and drink and electronics sectors in the region which always hold up well even in difficult economic conditions. Output and total orders in the Region held up especially well compared to the national averages.
Looking forward, given the potential for the economic situation to deteriorate further and force the sector into recession next year, Make UK re-iterated its call for Government to bring forward a ‘shock and awe’ package of policy measures on a scale in line with those seen during the worst points of the pandemic. This is essential to prevent a permanent scarring of the economy, help protect viable companies in the South East and avert significant job losses.
The measures in the statement tomorrow must set out concrete and specific actions to help business deal with escalating energy costs, as well as a range of measures to aid cashflow, provide greater access to labour and encourage investment, especially in energy efficiency technologies.
In a worst-case scenario of companies being asked to stop production or, a reduced working week, Government should also introduce an energy furlough scheme similar to that introduced during the pandemic.
Commenting, Jim Davison, Region Director for Make UK in the South East said:
“Whilst industry has recovered strongly over the last year, the storm clouds are gathering in the face of eyewatering costs and a very difficult international environment. This threatens to shatter expectations of a sustained recovery from the pandemic and put many perfectly viable businesses in the South East at risk.
“Clearly some of the factors impacting companies are global and cannot be contained by the UK Government alone. However, we have already wasted a substantial amount of precious time over the summer playing the fiddle while Rome has started to burn. As a result, urgent and decisive action is needed by the Chancellor to help shield the economy and protect companies and jobs, otherwise we risk a permanent scarring of the economy.”
Matthew Sewell, Head of Manufacturing at BDO in Southampton, said:
“We are seeing manufacturers in the South East continue to demonstrate their resilience despite the cost pressures on the sector. However, input prices are at near record levels for the second quarter in a row as profit margins continue to fall.
“The new Government must recognise the daunting position manufacturers find themselves in with respect to soaring energy prices, which alone is an indicator of the need for short- and long-term support. The Government needs to set out details for sustained business energy support as soon as possible. Implementing tax incentives to encourage investment in energy-saving plant and machinery would be particularly helpful in the current circumstances.”
The immediate measures being proposed by Make UK include:
- Reverse the decision to increase National Insurance Contributions that came into force in April 2022.
- Extend the business rates relief to include manufacturing and extend to the end of 2023
- Simultaneously undertake a full and fundamental reform of Business Rates
- Expand the current tax exemption for work-related training into a Training Investment Allowance, providing a tax rebate on investment in training for existing employees
- Commit to a full review of the Apprenticeship Levy
- In order to help companies invest make the increase to the Annual Investment Allowance permanent