Government's Industrial Strategy delayed by Brexit

74% of manufacturers do not think enough progress has been made on the Industrial Strategy 18 months since it was announced, according to research by accountancy and business advisory firm BDO.

BDO explains that many manufacturers feel that what the Government claims is record levels of public investment in research & development, infrastructure and technical education has not yet had a significant impact on their businesses.

The effects of Brexit have also caused substantial delays to the political progress of business legislation through parliament. Recent research from Thomson Reuters shows a 27% fall in the number of business-related laws passed in the UK in 2017/18, down to just 788 laws, from 1,080 in 2016/17.

BDO’s survey of Make UK members shows that 89% of manufacturers say it’s crucial the Government builds a sustainable industrial strategy for the next 15-20 years that avoids the disruptions of political cycles and party politics.

Tom Lawton, head of manufacturing at BDO, commented: “The UK’s manufacturing industry is being hit twice over by the effects of Brexit. Order books are being affected by uncertainty over when and how the UK will leave the EU, and the Government is being severely distracted from delivering its Industrial Strategy.

“The new leadership contest is diverting attention even further away from what UK manufacturing needs right here, right now.”

The Department for Business, Energy and Industrial Strategy launched its Industrial Strategy white paper in November 2017. The Government said it was seeking to “help businesses create better, higher-paying jobs with investment in the skills, industries and infrastructure of the future”.

The majority of manufacturers see productivity as a major issue

The overarching goal of the UK’s industrial strategy is to boost productivity – a task that Lawton says has eluded successive governments.

UK productivity growth has stagnated considerably since the 2008 financial crisis. GDP per hour in the UK increased just 1.1% between 2008 and 2016 – compared with 8.5% in the US, 7.4% in Japan and 6.5% in Germany.

Despite the Government’s efforts, 68% of manufacturers surveyed by BDO still see productivity as a major issue for their business.

Research and development (R&D) is strongly associated with improvements in productivity, however, 63% of manufacturers think that the Government is still not doing enough to encourage R&D in the sector.

Manufacturers worried about Government’s focus on London and South East

The Business, Energy and Industrial Strategy Committee in the House of Commons has criticised the Government’s Industrial Strategy for being too focused on London and the South East of England – something that is backed up by BDO’s survey.

While 52% of manufacturers in London and the South East think enough progress has been made on the Industrial Strategy since its launch, only 27% of manufacturers in the West Midlands and 19% in the North West agree with this.

Mr Lawton added: “For the Government to be accused of focusing on London and the South East at the expense of the rest of the country is nothing new, but it is particularly damaging to the manufacturing industry.

“The vast majority of the UK’s manufacturing takes place far from Westminster, and the Government must invest in the infrastructure that will help manufacturers in other parts of the UK grow and create employment.”

Manufacturers want help on skills gap

Only 21% of manufacturers surveyed by BDO think that the Government is doing enough to help them address the skills gap. A lack of skilled workers is already a big issue for manufacturing sector, and BDO says that it is one that may worsen depending on the outcome of Brexit.

Lawton says that the Government should be looking to expand its apprenticeships scheme to cover not just young people entering the manufacturing workforce, but also the retraining of experienced manufacturing workers.

BDO www.bdo.co.uk