Industry chief calls for 15% GDP target for manufacturing

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The head of Make UK, Britain’s manufacturing body, has called for all political parties to commit to an industrial strategy with an explicit target for industry to account for 15% of UK GDP, with the potential to add an extra £150bn to economic output.

In his address to the Make UK National Manufacturing Conference at the QE2 Centre in Westminster, CEO Stephen Phipson set out five key priorities for the next Government, as well as calling for a fundamental review of defence policy and, procurement policies which favour the UK’s defence manufacturing sector.

Ahead of the Budget Statement, Phipson urged the Chancellor to announce that this will be the last such statement and that, from now on, the next Government should announce there will be no annual fiscal statements of any kind. Instead, in order to provide business with greater stability, he called for tax and spending policies to be set out at the beginning of each Parliament and then only changed in exceptional circumstances.

Phipson called for the next Government to commit infrastructure spending to match the OECD average, with the planning system being torn up and current fiscal rules on capital spending changed. He also said that the next Government should double down on policies on net zero and safeguard energy security.

On industrial strategy and the 15% GDP target Phipson said: “The lack of a modern, long-term, robust industrial strategy is the UK’s economic Achilles heel. Every other major economy, from Germany, to China, to the US, has a long-term national industrial plan, even Barbados has one. As such, the UK is an outlier and if we are to help tackle our regional inequality and, improve our competitiveness on a global stage, we need a national industrial strategy with cross party consensus as a matter of urgency. One which survives elections and parliamentary cycles.

“Overall, such a strategy would have the aim of growing the contribution of manufacturing to GDP from 10% to 15% and so I am calling on all political parties to commit to this in their manifestos. Some may see this ambition as fanciful but, as globalisation shifts, why not aim to produce more here so we are less dependent on others for everything from our food to our energy and security. If we were to achieve this ambition, over time it would add around one hundred and fifty billion pounds to our economy, help tackle regional equality and to pay for the public services we all want to see.”

Turning to review Defence policy and procurement, “We need to prepare ourselves for the long haul in Ukraine, potentially without US involvement, as well as continued commitments in the Middle East. Whoever forms the next Government needs to prepare the public that these commitments may be open ended and involve significant increases in defence spending,” said Phipson. “As a result, the current two per cent target must now become a baseline, not a ceiling, and the next Government must commit to an immediate fundamental review of defence policy. This must be accompanied by examining how we execute Defence procurement and, how we continue to invest in our own Defence manufacturing industry, rather than buying off the shelf from overseas.”

On policy stability and abolishing annual fiscal statements, Phipson warned that the UK needed to see a return to political and policy stability, as well as a debate about some very serious choices we needed to make as a country. “But, five Prime Ministers in eight years and fifteen Business Secretaries in fifteen years is no recipe for this. Nor is the fact we have had six plans for growth in little over a decade, while the department responsible for industry has been re-organised five times in the same period. Any of you running businesses this way would have gone bankrupt.

“The fact we have two statements a year has been responsible for twenty-six changes in Corporation Tax since 2019. Those of you who are Finance Directors must be baffled by the ticker tape of announcements. Instead, I would urge any Government of whatever colour to announce their tax policies for the lifetime of a Parliament, which would only be changed if exceptional circumstances merit it. No changes to investment allowances, Corporation Tax or Green targets for five years would really help.”

Turning to skills, Phipson said that as part of an industrial strategy, we need to see a skills revolution, beginning with substantial reforms of the Apprentice Levy and a complete review of the vocational skills system. “This must be a national endeavour to equip the current, and next, generation workforce with the digital skills they will need for the many jobs of the future that have yet to be invented. This revolution must also start within the education system so that we have a constant pipeline of talent to fuel the expansion of manufacturing.”

In terms of infrastructure spending, he urged the next Government to increase infrastructure spending to the OECD average.

“This must be accompanied by ripping up the cumbersome, expensive planning system with a fast track for projects of strategic national importance. In addition, the fiscal rules which are preventing investment in capital spending. Must be changed and, if the Treasury objects to this then we need to change the rules or, split the Treasury into a Ministry for Finance and a Ministry for the Economy,” said Phipson.

“The decision to cancel HS2 was deeply frustrating and a prime example of our failure to invest in a long-term asset for the country’s balance sheet. It also sends the wrong signal to overseas investors about the UK’s ability to manage large projects.  Cancelling it was the ultimate in political short termism and, failing to invest in such a strategic project for the future is something I have no doubt we will come to regret.”

Finally on net zero, Phipson said that the UK needed to double down on maximising the opportunities of a net zero economy while safeguarding UK energy security, the biggest, transformational issue we face.

“The UK has a genuine opportunity to become a world leader in this area attracting billions of pounds worth of private investment. Rather than arguing over a specific sum, we need to see policy certainty and clarity from whoever forms the next Government so that business can maximise the substantial opportunities green transition presents.”