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A fine balancing act

Published:  18 December, 2024

The Chancellor’s recent Budget statement reflects the delicate balancing act required to manage national finances while laying foundations for future growth. While there are encouraging elements for the UK’s manufacturing sector, the immediate cost implications raise significant challenges for businesses, especially small and medium-sized enterprises (SMEs).

Among the headline measures, the rise in Employer National Insurance Contributions has drawn sharp criticism. As Verity Davidge, Director of Policy at Make UK, highlighted, this increase, compounded by the growing National Living Wage and the apprenticeship levy, risks stifling recruitment and investment in the workforce. Many manufacturers, particularly smaller firms, will face difficult decisions about hiring and pay increases, potentially leading to some job losses. These concerns underline the broader pressures on employers as they navigate a rising tide of operational costs.

Nevertheless, the Budget is not without its positives for industry. A recommitment to a long-term Industrial Strategy marks a pivotal shift for the UK, historically an outlier in this regard. Make UK’s Chief Executive Stephen Phipson praised this direction, emphasising its potential to unlock growth and high-quality jobs across the country. However, he urged the Government to move swiftly in implementing sector-specific plans to ensure this strategy translates into tangible progress.

The Corporate Tax Roadmap also provides a welcome sense of stability amid economic uncertainty. Businesses rely on predictability, and as Make UK’s Senior Economist Fhaheen Khan noted, the clarity provided by the roadmap will help encourage investment in innovation and productivity-enhancing projects. By balancing tax burdens with incentives for high-growth industries such as automotive and aerospace, the Government aims to strengthen the UK’s position in advanced manufacturing.

Meanwhile, the continued funding for the Made Smarter programme offers a vital lifeline for SMEs seeking to embrace digitalisation. This initiative has been instrumental in helping smaller manufacturers adopt automation and digital technologies, critical steps in boosting productivity. Nina Gryf from Make UK rightly underscores its role in maintaining the UK’s competitive edge in the global market.

Overall, the Budget seems to reflect a complex trade-off between immediate fiscal pressures and long-term industrial ambitions. While manufacturers will face short-term challenges, the outlined measures offer a framework for future growth. The success of this vision, however, will hinge on the Government’s ability to act decisively and support businesses through this transitional phase which obviously remains to be seen.

On behalf of the PWE team, I would like to wish all our readers, advertisers, and supporters a healthy and happy 2025.

Aaron Blutstein, Editor

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