Following the release of the UK manufacturing PMI this morning (1 November), Chris Barlow, Partner at MHA, says the government must intervene more, not less, to restore the country’s competitiveness that has been battered by ongoing political turmoil:
“Despite numerous U-turns on recent economic measures from the new Chancellor in an attempt to establish economic stability, UK manufacturers continue to be crippled by longstanding issues including labour and skill shortages, supply chain issues, rising inflation and eye-watering energy prices.
“These have been exacerbated by the lack of stability and diminished confidence caused by the UK’s political turmoil in October, which has severely damaged the sector’s competitiveness within Europe and beyond. While manufacturers broadly welcomed the government’s 6 months of support against the spiralling energy costs, competitors such as Germany have unveiled energy support packages running until 2024. The government’s short-sighted approach, combined with the now reinstated rises to Corporation Tax, have seen the UK become a far less attractive place to invest and do business.
“The government must intervene to restore competitiveness and rebuild manufacturers’ confidence to invest. While permanently setting the Annual Investment Allowance at £1 million from April 2023 is a welcome step, this alone will not provide manufacturers with the confidence to invest in the long term, overcome current economic pressures and drive the country towards net zero by 2050.
“The Chancellor must seize the moment and use the upcoming fiscal statement on 17 November to provide new tax incentives to stimulate greater sector investment and drive productivity improvements. The government should also work alongside the Bank of England to reduce interest rates and drive more spending to support vital services. The pressures of inflation are largely driven by oil and gas prices, meaning interest rate rises will not dampen their impact. It is therefore vital for the government to intervene more and not less, to affect the markets and make the country an attractive place to do business again.
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