Post-Brexit clarity must Trump everything else in Autumn Statement

Viewpoint

The Autumn Statement is an opportunity for the government to give engineering and manufacturing some much-needed certainty, says Martin Hurworth

2016 may well go down in history as the year when we reached peak uncertainty. Whether it’s elections, referendums or pollsters’ predictions, it seems that all bets are off.

It’s getting hard to remember a period of time where manufacturers and engineers could invest in capex, people or skills with confidence. Not since before the Scottish Independence referendum was announced back in 2013 has there been anything close to stability for more than a few months at a time.

It’s been one vote after another, with each one giving firms more pause for thought on their next big investment decision.

Uncertainty and growth might not be mutually exclusive, but they’re not natural bedfellows either. The recent GDP figures from The ONS showed that; with growth up 0.5 - slower than the previous quarter - but down 1% for manufacturing.

The steep fall in Sterling can account for much of this drop. Down 14.4 per cent in September compared to last year, it quickly hit import costs which, in turn, affects exports for bigger businesses who do both. Higher prices shrunk manufacturing output compared to other sectors like services, agriculture and construction; sectors which we’re already over-reliant on.

We might be on track to have the fastest growing economy in theG7 this year, but we need clarity if we’re to keep up the progress long-term and reverse the trend of manufacturing decline. The Chancellor has to deliver an Autumn Statement which outlines what the new future looks like for the UK in five years time. In recent months it’s been hard to predict five days ahead.

What should a successful engineering or manufacturing firm look like in post-Brexit Britain? If the Government can’t answer this question on November 23rd then it’s up to firms themselves to find the answer.

'Re-shoring' holds the key

Bringing production processes back in-house or to the UK has to be an absolute priority in this brave new world. New trade deals take years to negotiate, and in the meantime businesses who significantly import are at the mercy of the markets.

Some don’t have that luxury, but those firms which export and have already 're-shored' part or all of their manufacturing will have a significant competitive advantage for the foreseeable future. They are the ones who will be able to capitalise on a weaker pound, avoid fluctuating import costs and, once the trade deals are done, export to the world.

Stand out to find the top talent

The big conflict ahead for the Government’s Brexit negotiations will be balancing calls to limit migration with businesses’ demands for skilled workers in a time of near record low levels of unemployment, and the STEM shortage affecting schools and universities.

While politicians wrestle with the detail, companies can be putting their efforts into attracting and retaining the best engineers from the shrinking pool of talent. Those SMEs who can’t compete with the Blue Chips on paper can instead offer staff more variety, autonomy and meaning in their work.

Lean manufacturing must become the default

It’s more than just a buzzword; lean now makes the difference between a business surviving or thriving. Lean thinking will become a vital part of business planning in 2017, being applied throughout the whole business, from engineering and production to IT, HR and sales.

The flip side of uncertainty is new opportunity, and smarter, more efficient production can make adapting quickly to change a far less painful process. However the Chancellor has to play his part too.

Autumn Statement 2016: How the Chancellor could create certainty for engineering

Expanding R&D tax credits:

• Increase the potential cash repayment from HMRC on R&D spend from the current limit of 33.35% of the cost

Make apprenticeships a priority:

• STEM shortages are widely known but no where near fixed. Expanding the apprenticeship grants would go a long way

Clarity on trade tariff position:

• An indication of the Government’s ‘red lines’ when it comes to trading with Europe post-Brexit would allay concerns.

Martin Hurworth is managing director of Harvey Water Softeners