Manufacturers have called on government to introduce a six-point plan to arrest the accelerating downturn on the back of revised figures showing the sector is set to be hit harder this year without any prospect of recovery until at least mid-2010.
EEF, the manufacturers’ organisation made the call following its Annual Manufacturing Report, and the need to protect key sectors and their supply chains. The report shows that despite the significant improvement in the sector’s productivity performance in recent years, where it has outperformed the rest of the economy by more than two and a half times since 2003, manufacturing will contract by 5 per cent in 2009 and is unlikely to grow again until the second half of 2010.
The EEF proposals include:
* A comprehensive Loan Guarantee Scheme. Government must take decisive action to restore access to credit. The government should introduce a national scheme to guarantee bank lending to businesses of all sizes.
* Minimise impact when Credit Insurance is withdrawn or reduced. The speed at which credit insurance is being withdrawn threatens the supply-chains that are the heart of the UK’s manufacturing base.
* ?Quantitative easing. With the official Bank Rate fast approaching zero and the effectiveness of future cuts in doubt, the Bank of England will need to take unconventional, yet targeted measures to increase the supply of money and credit in markets that need it the most. But it must also proceed with extreme caution. An excessive or risky build up in its balance sheet would undermine growth in the long-run.
* ?Short-time working. Manufacturers are desperate to hold on to skilled staff through this downturn. More flexible and generous short-time working allowances will help manufacturers cope in the short-run.
* ?Relieve the tax burden. Restore empty property relief and freeze business rates for 12 months. Rather than incentivising regeneration, restricting empty property is punishing legitimate businesses struggling to cut costs in a recession and undermining the link between the manufacturing base and local economies. Raising the Annual Investment Allowance to £250,000 will ease cash-flow problems.
*? Restrict new regulation. Companies need to be able to maximise the flexibility of their operations. A commitment to introduce the proposed Regulatory Budgets will help to prevent the introduction of unnecessary new regulation that adds extra costs on to business.