Manufacturers' lukewarm response to Budget

Chancellor Alistair Darling announced an investment of £250 million in low carbon business opportunities and innovation, including initiatives on low carbon vehicles, and the nuclear and renewable energy industries; £50 million extra for the Technology Strategy Board to expand its work; and £10 million extra for UK Trade and Investment to help exporters. Business Secretary, Lord Mandelson, said that backing green, low carbon businesses and technologies would be a priority. "Britain doesn't need to be pessimistic about our economic future as long as we prepare for it. The new fund announced today is a big step forward." The Budget also announced extra help for the car industry. A car and van scrappage scheme would, the Chancellor said, provide a short-term boost to the automotive manufacturing industry, retailers and the auto supply chain which had been badly impacted by falling vehicle sales. The idea is that this would remove older vehicles from the road and encourage consumers to buy newer, more environmentally-friendly models. Gilbert Toppin, chief executive of the manufacturers' organisation EEF said the Chancellor had gone some way towards alleviating the short term pressures facing companies. “The measures on investment, trade credit, low carbon technologies and car scrappage are helpful though he should have gone further to make a real difference. However, the growth forecasts look overly optimistic and there is a serious danger that business will pay the price in higher tax if growth falls short. Manufacturers will also be disappointed that the Chancellor has hit them with the double whammy of failing to provide support for short time working whilst increasing the costs of redundancy. On support for low carbon technologies, Toppin added: “Whilst the Chancellor promised much in this area, there appears to be little new money on offer.” On other measures, EEF said the doubling the level of capital allowance would provide some relief for cash strapped companies looking to invest but it provided only limited incentives. Raising redundancy pay would have a disproportionate impact on manufacturing where rates of pay tended to be higher than in other sectors Jack Matthews, chief executive of food and drink sector skills council Improve welcomed the government’s pledge of £260 million in additional funding to train under 25s, but said more needed to be done to combat the recession’s impact on employment and skills. He said individual sectors were in “dire need” of direct assistance to help fund solutions to training and skills, and claimed additional funding for skills would only be effective if it was left to industries to decide where it should be deployed. A proposal by the Learning and Skills Network to setup a £300 million ‘sector recovery fund’ administered directly by the 25 sector skills councils represented a far more realistic way of averting a drastic tailing-off in training as cash-strapped companies tightened their belts. Matthews said a ‘rapid-response’ strategy for retraining and relocating workers in areas where their skills were needed should be put in place. “I do not believe this can happen while the government clings onto the purse strings and attempts to micro-manage where funding is allocated,” he added. Tony Wilson, chairman of exhaust and catalytic converter manufacturer Klarius said that making money available to stimulate the purchase of new cars in the UK was a false economy; a waste of public money and, contrary to recent coverage, did not benefit the German car industry when it was implemented there. “The UK has many hundreds of thousands of people employed in the automotive aftermarket industry. From roadside recovery, auto factors and distributors, to repair shops and fitting stations we have a major employment sector designated to the support of older vehicles. Falsely stimulating new sales and removing perfectly serviceable older vehicles will have a massive and damaging effect on employment and in the case of auto mechanics in an area where the government is promoting apprenticeships and attempting to recruit young people to the sector,” Wilson said. The damaging environmental impact of manufacturing new and disposing of old vehicles was substantially greater than maintaining the older vehicle correctly and allowing a natural evolution of the UK car park over a five-year period. However, David Raistrick, UK manufacturing industry leader at Deloitte, said the scrappage scheme was a boost to the UK automotive industry that could jump-start new car sales which were at their lowest level for over a decade. He went on: “Some have argued that such a scheme would have a limited impact in terms of boosting the UK economy since over 80% of cars sold here are manufactured overseas. However, this is to overlook the many automotive component manufacturers which make components for overseas manufacturers which will be buoyed by this news. It also forgets that over 500,000 people are employed in the UK automotive industry and any move to add greater confidence to consumers buying in this sector should be good news.” Also focusing on skills, Engineering and Technology Board (ETB) chief executive Paul Jackson called for part of the £1.7bn investment in Job Centres to be used for retraining people in key sectors such as engineering. “The Chancellor’s low carbon strategy is a step forward but the UK will need thousands more trained engineers to achieve the 34% cut in CO2 emissions by 2020 - including 262,000 in solar power and 127,000 in wind and hydro power alone," he said. "Specialist training in these sectors is absolutely crucial if Britain is to keep pace with the rest of the world.