Investment plans ‘need backing of new PM’
Investment intentions have improved as manufacturers put plans in place to see them through an anticipated global slowdown, according to the latest data.
CBI economist Anna Leach says it is now important for the new Prime Minister to build on these ambitions through tax incentives and reform of the rating system.
A new survey by the CBI and Accenture reveals that growth in manufacturing output and orders eased in the quarter to July, slowing to more typical rates of expansion following a period of exceptionally strong growth over the previous year. Optimism within the sector fell for a third consecutive quarter.
However, investment intentions generally improved, and employment within the sector continued to grow “at a robust pace”, though less quickly than expected last quarter (for the third quarter running).
Concerns over shortages of labour and shortages of components and materials remained acute, but off their recent highs.
Ms Leach, CBI deputy chief economist, said: “The manufacturing sector has been an economic bright spot in recent months, but output and orders have softened amid ongoing cost pressures, supply challenges and a generalised weakening in economic conditions both in the UK and globally.
“It is encouraging, however, to see investment intentions firming. Stronger investment will be vital if the UK is to reinvigorate growth and keep recession at bay.
“The new prime minister will need act quickly to fan the flames of these ambitions by announcing a permanent successor to the super deduction and urgently reforming an outdated business rates system that currently acts as a tax on investment.”
Accenture’s Maddie Walker added: “There are strong signs that manufacturers are pursuing long-term strategies to see themselves through current volatility with investments in their people, plants and machinery.
“Rather than pull back on innovation, investing in technology will help to improve productivity, keep costs down, and unlock new ways to make products more effectively.”
The survey was conducted between 24 June and 12 July, with 237 manufacturing firms responding.
A more pessimistic survey emerged from the Federation of Small Businesses which said rising cost pressures have hit confidence across Scotland.
Concerns over the economy and a shortage of skilled workers have also weighed on optimism over the past three months.
The FSB said 91% of Scottish respondents to its survey had reported a rise in costs during the second quarter.
Andrew McRae, the FSB’s policy chairman for Scotland, said: “Many independent and local businesses are finding trading conditions merciless.”