General election ‘24: What does it hold for manufacturers?

Tuesday June 25, 2024

What manufacturers will be looking for in the manifestos

So far, 2024 has brought good news for UK manufacturing.

May’s purchasing managers’ index (PMI) showed that the sector’s output is growing at its fastest pace in two years, supported by healthily expanding order books. Against this, producers’ expectations of future growth climbed to their strongest since February 2022.

While this paints a picture of a sector emerging from what have been volatile conditions, manufacturers are clear that achieving further growth and maintaining it over the long-run will be predicated not just on fair economic winds, but on direct support and investment in the industry.

Indeed, they view the looming general election as an opportunity to unlock this. But what do manufacturers want to see from an incoming government and what is it likely to deliver?

Planning ahead

A good starting point is Make UK’s ‘Makers’ Manifesto’.

Top of the industry body’s wishlist for the future are improved conditions within which to attract investment, delivered via a consistent, long-term industrial strategy.

Promises of such long-term plans have already been made. Both Labour and the Liberal Democrats have said they will publish fresh industrial strategies if they were to take power, and both have put this in the context of what they see as a need for a greater certainty across the economy.

Alongside putting a new plan in place, the Liberal Democrats have committed to reestablishing the Industrial Strategy Council – an ‘impartial and expert’ body, abolished under Kwasi Kwarteng, with the purpose of monitoring progress against national strategy. Meanwhile, Labour has stressed that its plan would also inform national procurement and trade policies – the latter being another area where manufacturers are calling for further support.

The Conservatives haven’t committed directly to a fresh, overarching industrial strategy. However, they have set out support for specific manufacturing subsectors – chiefly automotive, those manufacturing components for renewable energy projects and ‘strategic’ sectors, such as aerospace and life sciences, through the already-announced Advanced Manufacturing Plan. By virtue of a pledge to increase military spending to 2.5% of GDP – a figure Labour has also committed to – it will also bolster those operating in the defence supply chain.

The value of having a long-term strategy is clear. A trusted, well-understood industrial roadmap makes it easier for businesses to plan and invest with certainty, and builds confidence in their supply chains and lenders.

In contrast, a shaky policy foundation can breed a reluctance to commit to decisions or funding, stymie inward investment and – at worst – result in missed opportunities and even the collapse of businesses and local supply chains.

Manufacturers will want to see these big plans carried through.

Skills, skills, skills

Skills is another key area where manufacturers will be looking for aid; Make UK highlights that fewer than one in five firms in the sector feel that current government support is enough.

Here, again, the manifestos bring what will be seen as good news: all major parties have recognised the need for more investment in upskilling the workforce.

Examples include the Conservatives planning to create an ‘Advanced British Standard’ for 16-19 education, bringing what they call ‘the best of A -Levels and T-Levels’, together; Labour establishing ‘Skills England’ to ensure that the right skills base is in place to deliver its industrial strategy; and the Liberal Democrats creating new ‘Lifelong Skills Grants’, as well as developing National Colleges as national centres of expertise for ‘key sectors’.

Manufacturers would no doubt hope they are one of those sectors identified.

But, more generally, and whoever takes power, they’ll want to see that skills support is targeted to their needs. General skills programmes will likely only go so far in helping equip the sector with the capabilities it needs to grow and compete in the future.

Missed opportunities?

One area where firms may be disappointed not to see more focus on is the road to net zero and the opportunities it offers.

While there’s plenty across the manifestos about the ‘green’ economy and some support for individuals when it comes to energy bills, there are no direct commitments for anything new to help reduce or subsidise the cost of manufacturers investing in energy efficiency and continuing to decarbonise their operations, beyond the Liberal Democrats’ commitment to increasing the existing Industrial Energy Transformation Fund.

Improving environmental sustainability, and reducing reliance on fossil fuels, is a journey that many firms are on – not only from a position of contributing to national net zero targets, but as a way of strengthening their resilience against risks such as energy price fluctuations.

Of course, manufacturers are likely to benefit from broader, economy-wide measures designed to grow the green economy, such as increasing the proportion of renewable energy in the grid. But in a sector where decarbonisation often carries a steep price in terms of capital expenditure, they’ll be hoping for more targeted help that reflects their own circumstances.

Looking ahead

These issues are just some of many that could have a bearing on the sector.

With manufacturing such a keystone in the economy, everything from housing policy to infrastructure plans will have an implication for the UK’s producers.

Whichever party takes Downing Street on July 4th, and whatever policies they enact, manufacturers will need to continue doing everything that they can to keep driving their own growth and building their resilience. While we wait for the outcome, this is a good chance to take stock of the here and now, and see what they themselves can deliver.

With manufacturing such a keystone in the economy, everything from housing policy to infrastructure plans will have an implication for the UK’s goods producers. Richard Sanfourche Financial Advisory, Partner

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Richard Sanfourche

Richard Sanfourche

Richard Sanfourche

  • Partner
  • Financial Advisory
  • London