01 Jul 2022

Challenges ahead for manufacturers?

Challenges ahead for manufacturers

As we enter the second half of the year there’s a sense that manufacturing is going to face some significant headwinds. Having seen a very strong bounce back from the pandemic over the last twelve months with Make UK’s survey balances seeing some of the strongest positive numbers ever recorded, the picture from the latest survey in the second quarter shows a more difficult picture emerging. Make UK chief executive, Stephen Phipson, comments.

Ongoing rises in energy prices, raw materials and transport costs are likely to push inflation higher, with further disruptions from the tight Covid lockdowns affecting Chinese ports likely to cause further disruptions to supply chains. As a result, consumer confidence has been hit hard with all major sectors of the economy seeing output fall and these prevailing conditions are likely to make that worse.

While Make UK is not predicting the same kind of downturn as we saw during the height of the pandemic, and despite the resilience it has shown in the last few years there is no doubt the sector won’t be able to escape the knock-on impact from the cocktail of factors industry is currently facing. In the face of these challenges, the key question is what action Government could consider taking to mitigate the worst impacts and help shield industry from rising costs. Given the scale of the increase in energy costs it was baffling that Government took no action in the Spring Statement and this would be a good first starting point.

Secondly, Make UK has long called for action Business Rates which should be waived or reduced for the next year while VAT deferrals could be introduced for larger companies and waived altogether for SMEs. Third, given Make UK’s latest survey shows the sector has reached a tipping point where the rise in costs is impacting on investment Government should extend the super-deduction scheme and make the increase in the Annual Investment Allowance permanent.  By taking these measures now Government will be providing vital breathing space that will help companies pass through the current stormy picture.