Following the release of the latest UK Manufacturing PMI on 1 February, the government has been called upon to introduce a new industrial strategy to re-instil hope in a sector facing a barrage of economic pressures in 2023.
“The sector remains in a state of trepidation as it faces the combined headwinds of rising costs, skill shortages and high energy prices. With the risk of a UK recession remaining high, it is no wonder that the outlook for manufacturers remains gloomy for 2023,” said Richard Powell, partner at accountancy group MHA.
“In 2022 many manufacturers were able to pass some of the pain of cost increases to their customers. Whether this can continue into 2023 remains to be seen and as a result many will be forced to review their cost bases to protect margins, putting particular pressure on businesses to reduce wages and supply chain costs. There is also greater need to investment in renewables and automation that will have immediate financial impact, however the removal of the ‘super deduction’ for capital allowances on plant and machinery investment and the R&D incentive reduction tax relief dropping from 130% to 84% on 31 March put much needed investment in innovation at risk.”
Powell continued: “The sector desperately needs a new industrial strategy backed up by a committee to oversee its implementation drawn from key representatives of both business and government. While the previous industrial strategy that was scrapped by Kwasi Kwarteng in 2021 wasn’t perfect, it set clear targets for key sector areas such as technology and innovation and provided policy makers with a clear framework in which to operate. The introduction of a new strategy, along with a separate Minister for Manufacturing, would be welcomed by the sector and provide a much needed boost of confidence across the sector that is currently at a very low ebb.”
