UK Manufacturing PMI: Industrial strategy can no longer be kicked into the long grass


With UK manufacturing output shrinking for the first time in two years amid businesses facing crippling inflationary pressures, only the combination of short term economic relief and a comprehensive long term industrial strategy from the government will enable the sector to prosper.

While Rishi Sunak and Liz Truss have set out opposing views about how they would stimulate the economy, an extension of the super deduction and a continuation of the temporary Annual Investment Allowance beyond March 31 are high up on manufacturers’ short-term wish list and should be prioritised by the government. Immediate relief on business rates and fuel prices will also be welcome as manufacturers’ margins are increasingly squeezed, with many no longer able to pass higher prices onto their customers.

With the sector committed along a path to net-zero, tax incentives to encourage greater clean energy investment and implement ESG opportunities would also help offset high fuel costs as autumn and winter approach, in addition to supplementing oil and gas supplies under continued threat from the impact of the war in Ukraine.

While these short term measures will help manufacturers navigate the economy’s current choppy waters, a long term industrial strategy that fosters investment in skills, technology and innovation is urgently needed to encourage greater capital expenditure from businesses and increased foreign investment in the sector. A shortfall of skills has been a perennial problem for the sector for many years and must be addressed from schools, through to colleges and apprenticeships. Only with both short-term relief and a strategic long-term industrial strategy will manufacturers be equipped to ensure sustainable growth and development within this vital sector for UK plc.