UK manufacturing holds key to unlocking Government’s domestic and global ambitions
The success of the UK's manufacturing sector will be central to Government's ability to deliver on its national ambitions to level up the whole country, reach Net Zero by 2050 and become a global science super-power.
Today, five trade associations together representing sectors with nearly 800,000 employees, and an annual turnover of £338.2bn and £166bn in exports, publish a joint report setting out policy recommendations to maximise the potential of UK manufacturing to generate and sustain high value jobs and growth.
The Manufacturing Five – the Association of the British Pharmaceutical Industry (ABPI), ADS, the Chemical Industries Association (CIA), the Food and Drink Federation (FDF) and the Society of Motor Manufacturers and Traders (SMMT) – make recommendations on how Government can work with them to seize new economic opportunities, sustain jobs, and deliver growth and prosperity as we emerge from the pandemic.
This first joint report by the five associations sets out a long-term strategy that puts manufacturing at the heart of the UK's domestic and global agenda, and supports the delivery of the Government's five key ambitions. The report recommendations include:
Levelling Up the whole UK
Recommendation: Develop the infrastructure, skills and incentives to develop new clusters of advanced manufacturing across the UK.
In 2019, manufacturing firms accounted for 58 per cent of all R&D capital expenditure in the UK (£2.3bn). Encouraging investment in advanced manufacturing will be absolutely critical to the Government’s promise to level up the country. Investment would put the UK on a competitive footing with leading nations around the world.
Long-established UK manufacturing clusters of excellence across the UK such as automotive in the West Midlands, Clyde shipyards and chemicals in the Northeast, support region-wide supply chains and employment. The use of a long-term capital grant facility worth 10-15 per cent of the value of investments could help attract significant new projects into clusters and beyond.
Achieving Net Zero together
Recommendation: Scale up and enhance the industrial energy transformation fund to deliver progress towards Net Zero.
Decarbonisation of product and production processes is a shared ambition across advanced manufacturing, and while Government has set ambitious UK targets, this can only be achieved by a partnership with industry.
Complex manufacturing is energy-intensive, and it’s critical that the UK can compete to capitalise on emerging low-carbon opportunities, such as wind turbine blades, hydrogen and batteries. Energy costs and security are key considerations for companies looking to invest in the UK, and electricity costs here are 80 per cent above EU-competitors.
Faster progress towards Net Zero would be achieved if the government incentivised industry to invest in radical decarbonisation solutions in the manufacturing process.
Building a Science Superpower
Recommendation: Expand incentives to attract significant R&D investment.
Ambitions to invest 2.4per cent of GDP in R&D and become a "Science Superpower" require a partnership between Government and industry, and targeted action. Manufacturers are making critical investment decisions today that influence the next decade of investment.
Government should expand incentives to attract R&D investment from industry, such as including capital as eligible expenditure under R&D tax credits, and expand commitments to invest in R&D, securing new industry investment in the UK.
Modernisation of R&D tax credits would create 12,000 jobs and become a net revenue raiser for the Exchequer in just seven years, and by year 10, would be adding £4bn a year to the economy. In Aerospace, every £1 of Government funding for R&D leverages £12 of private sector investment.
Designing and maintaining world-class regulatory frameworks
Recommendation: Establish a coherent strategy for the UK's regulatory approach for manufacturing sectors, that delivers a level playing field and maintains the highest standards of quality and safety.
Government should establish clear principles for 'good regulation' for the new UK regulatory environment. This should look to minimise costs to business and carefully consider any international, regional or devolved divergence which might impact competitiveness or risk creating barriers to trade with key trade partners. It should also only diverge domestically where necessary or a clear advantage can be identified in partnership with industry.
Supporting international leadership and Global Britain
Recommendation: Place advanced manufacturing at the forefront of a long-term Export Strategy, developed with industry.
The UK's advanced manufacturing sectors are recognised the world over for high-quality, high-value production, and can both meet domestic demand and access global opportunities to the significant benefit of the national economy.
Government should create a globally attractive fiscal environment that supports and attracts manufacturing investment in both buildings, plant, equipment and R&D. In particular, business taxes should remain globally competitive, capital allowances and business rates should be more supportive for plant, machinery and equipment and the scope of the patent box should be extended to cover a wider range of Intellectual Property.
Kevin Craven, Chief Executive, ADS, said: "Manufacturing and engineering provide the key to building back better, delivering the high wage jobs the UK needs to prosper in a fiercely competitive global economy.
"Our sectors are national success stories that must be celebrated and supported to compete, to innovate, and to support Britain's global ambitions. Manufacturing is essential to achieving net zero, ensuring our national economic resilience, and providing rewarding careers, and we present this joint report as a blueprint for the continued growth of our industries in the decades ahead."
Richard Torbett, Chief Executive, ABPI, said: "Global pharmaceutical companies are making investment decisions now which will impact on the UK for several decades to come.
"Only with clear policies to attract R&D and advanced manufacturing to the UK will it be possible for the UK to keep pace with the ambitious life-science sectors in Europe, the US and the far East. There is only benefit to be gained from the high-skill, high-wage jobs that this would bring to all parts of the UK."
Steve Elliott, Chief Executive, Chemicals Industry Association, said: "Manufacturing is essential to innovation, economic health, national resilience and security, as Covid-19 has clearly illustrated. It transforms laboratory research into new products and services, can generate finance for reinvestment and makes the world a better and safer place.
"The chemical industry is a key foundation sector providing key raw materials and solutions to all other parts of manufacturing. The recommendations we propose in this report will build a new partnership between manufacturing and Government to deliver for our Country."
Ian Wright CBE, Chief Executive, Food and Drink Federation, said: "This timely report clearly sets out what the UK's manufacturing industries need in order to help the Government achieve its ambition of levelling up across the UK.
"With a footprint in every constituency, food and drink manufacturing offers enormous potential to level up this country. We are excited by the prospect of working with all Government departments to take forward the recommendations of this strategy paper. Together we can ensure UK manufacturers can bring growth and jobs to every part of the country."
Mike Hawes, Chief Executive, SMMT, said: "Manufacturing matters to the UK economy. It supports thousands of highly skilled, well-paid jobs right across the country, with sectors such as automotive contributing some £12 billion to the UK economy and exporting products around the world. As the sector transitions to the production of increasingly connected and electrified vehicles, it can play a crucial role driving Britain's productivity, creating additional jobs and delivering economic growth in areas that demand investment.
"This is why countries compete fiercely to have an automotive sector and why the UK must look to enhance our competitiveness to deliver economic, social and environmental ambitions."
VALUE OF MANUFACTURING EXPORTS
- Aerospace, Defence, Security & Space: UK aerospace exports amounted to £31.8bn in 2019, with 94 per cent of all UK aerospace output being for export. Defence industry export orders worth £11bn were placed by the UK's international partners in 2019, security sector exports are worth £7bn a year, and space sector £5.8bn.
- Automotive: UK automotive trade was worth more than £100bn for the third consecutive year in 2019 prior to Covid-19, and accounts for 10per cent of all export of goods - the UK's largest industrial goods exporter. The UK exported 81.0 per cent of its vehicle production in 2019.
- Chemicals: More than £55bn of chemical exports were exported globally in 2019.
- Food and drink: Overseas sales of UK food and drink manufacturing reached £23.6bn in 2019 having grown nearly 70per cent in 10 years.
- Pharmaceuticals: More than £23 billion of pharmaceutical products were exported in 2019.