A productive measure?

14 September 2008
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15 September 2008

The government is to invest £150 million to support manufacturers. But what do those in the industry think of its plans? Paul Snell finds out

If UK manufacturers thought they had it bad a few years ago, that was nothing given the current climate.

Activity continued its decline in August, according to the latest CIPS/Markit Purchasing Manager's Index, even if it did manage to recover slightly from the nine-and-a-half year low recorded in July.

And last week Office of National Statistics data showed a 1.1 per cent fall in manufacturing production between April and July this year, decreasing in 10 of the 13 sectors it examines. There were significant drops in the food, drink and tobacco and electrical and optical equipment sectors.

In addition, a study from manufacturers' organisation EEF and accountancy firm Grant Thornton found that despite the sector showing resilience in the face of economic turmoil, the government needed to "tackle this turning point for the economy head on".

So the government's announcement of its plan to pump £150 million into the sector in what it calls "medium-term support" should come as a welcome relief (See News,18 September).

In fact, despite the current downturn and economic uncertainty, the government believes the sector has "reason to be confident" the framework can help firms to beat current conditions and be competitive on a global scale. Even, says business secretary John Hutton, "emerge stronger and fitter than ever".

The proposals have been given a tentative welcome by manufacturers and their representative organisations. Martin Temple, chairman of the EEF, says the strategy is positive and has a clear understanding of the value manufacturing can add to the UK economy - a contribution estimated to be around £150 billion and three million jobs.

"The next step as with all such announcements is to deliver and back the positive words with firm actions of intention and support. This is a strategy for the long term and one we applaud. However, it does not detract from the need to use policy in the short term to help companies through the current turmoil and ensure they are in a position to take advantage of the upturn."

However, the speed of the change process may not be as quick as desired. The £20 million of public spend reserved to stimulate the manufacture of low-carbon vehicles will be allocated at the end of 2008. But the package from UK Trade and Investment for supporting low-cost production abroad will not arrive until the middle of 2009.

There was also the need for a "coherent procurement strategy" to allow manufacturers to plan and invest for the long-term, as mentioned by the CBI. However, the government repeated previous plans for each individual department to produce its own "innovation procurement plan" detailing how they will use spending to stimulate new ideas.

Suppliers were mostly supportive of the image boost for the sector through the creation of Manufacturing Insight - a new organisation to promote careers in the sector.

And although the focus of the document concentrated on exploiting new areas of business - the new "green economy" - there was something for traditional sectors too. "We applaud the strong political commitment for acknowledging manufacturing in general, so for all it was an important recognition," said Julian Hunt, communications director at the Food and Drink Federation, which represents the largest manufacturing sector in the UK.

But perhaps UK manufacturers should not celebrate too soon. In the same week the Associated Chambers of Commerce and Industry of India produced its own report detailing a 20-point plan to boost the sector in its country. Ideas include reducing the rate of corporation tax and more flexible labour laws to make the low-cost region a more attractive place for production.

SMsep2008

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