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Manufacturing Insights

POSTED: 22nd July 2015
IN: Guides
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The Enterprise Bill – prospects for reforming red tape

The new Government is making planning to further plans to reduce further the cost and burden of regulation on UK business as part of its forthcoming Enterprise Bill. This Bill proposes to cut red tape and save businesses at least £10 billion over the next 5 years and, in addition, the government will look beyond Whitehall and for the first time expect independent regulators contribute to a £10 billion savings targetsavings. This builds on the work of the previous Coalition government, which cut over £2 billion in red tape savings which, extrapolated over the lifetime of the coalition, and applying the fact that some of these would be recurring savings, amounted to £10 billion off the total burden of red tape. in cutting red tape.

The Bill will also establish a new Small Business Conciliation Service to help resolve business-to-business disputes. It is anticipated that these will for the most part be focused on late payment practices, with the government claiming that small firms are owed over £32 billion in late payments, and that many of them are not aware of their rights or are reluctant to launch legal challenges.

The Bill also aims to support businesses through the extension and simplification of Primary Authority, a scheme which allows a business to get advice on regulation from a single local council. This advice must then be respected by all other councils, which could reduce the time and cost to businesses of having to obey different rules.

Business rates appeals reform will also be introduced, including modifying the Valuation Tribunal powers to consider ratepayer appeals, and it will also allow for the Valuation Office Agency to share information with local government.Furthermore, the Bill will contain proposals for public sector redundancy pay, introducing a cap on exit payments with the intention ‘to end six figures pay offs.

The Immigration Bill and the skills levy

The Prime Minister has announced plans to reduce employers’ reliance on workers from outside of Europe. In a recent speech, the Prime Minister said he would ask the Migration Advisory Committee (MAC) to review the shortage occupation list again with the aim of removing many of the job roles currently on it. Under the previous Coalition Government the MAC explored whether a sunset clause of two years should be applied to job roles on the list. However, the MAC recommended against its implemented. 

The shortage occupation list currently allows employers wanting to recruit from outside of Europe to do so without having to undertake the Resident Labour Market Test, which requires employers to advertise the vacancy in the UK for a minimum of 28 days first, making it quicker and easier for employers to access the highly skilled workers they need. Furthermore, the forthcoming Immigration Bill will include provisions for a new levy to be introduced for those employers from recruiting outside of Europe to then fund UK apprenticeships. It is likely that the levy will apply to Tier 2 General visa and potentially Intra-Company Transfers. A consultation on the levy will be published in September. 

Finally, it is also important to note that for the first time the cap of 20,700 non-EEA migrants a year being brought into the UK by employers has already been met. This means firms which need to bring in a non-EEA worker for the rest of the year will struggle to do so. Competition between employers to do so may become fierce, and firms may need to reassess their staffing plans for the rest of the year as a result.

Cities and Devolution Bill – new regional powers and future opportunities for business

As part of the Government’s post-election agenda, there is a renewed focus on devolution, including within England. The Queen’s Speech in May announced a Cities and Local Government Devolution Bill. This Bill would provide a framework for the devolution of powers in the areas of transport, housing, skills, health and economic development to Combined Authorities and local areas. The Bill is being taken through Parliament at a speedy pace, with Royal Assent expected before the end of this year

The Bill is an attempt to make the process of devolution within England, which started in the second half of the last Parliament and accelerated following the Scottish independence referendum, a bit more transparent. It will also smooth the process for local government re-organisation and establish the requirement for a directly elected mayor for combined authorities (groups of local authorities which come together) that wish to take on a greater level of devolution.

It’s unclear at this stage what role Local Enterprise Partnerships (the coming together of businesses and local authorities to discuss local barriers to growth) will play in the process, as they are not mentioned in the Bill. The Government had also announced that City Deals which featured in the last Parliament would be complemented with Town Deals and County Deals, but again this is not directly mentioned in the Bill.

On the face of it therefore, the Bill simply enables future activity, what that turns out to be will be up to Ministers and local authorities to hammer out. For more information visit  the Parliment website.

Latest business trends from industry

The Office for National Statistics recently confirmed an eighth consecutive quarter of growth for UK manufacturers in the first three months of 2015. The latest business trends results compiled by EEF, the manufacturers’ association, outlines how manufacturing has fared in the second quarter of this year and expectations going into the second half of 2015

The survey results show that we should expect industry growth, but at a more modest pace. The balance of manufacturers reporting an increase in output over the past three months has dropped to 5%, the lowest response balance since 2013q1. The balance of responses to the survey show thatResponses balances on new orders have also been edging down. While export levels have remained fairly static over the past few years a buoyant domestic market has been an important prop for UK manufacturers.

In the past six months the UK demand environment has become less supportive and a net balance of companies reported a fall in UK orders in the most recent quarter. Manufacturing is a diverse sector and the trend in orders reveals differing demand patterns across different sub-sectors. There is a notable weakness in UK orders across the metals and mechanical equipment sectors – industries that have a higher degree of exposure to North Sea oil and gas activity. The supply chain effects of the lower oil price were highlighted in last quarter’s our report last quarter and look set to persist over the coming quarters as investment plans are scaled back or remain on hold. Consumer facing sectors such as motor vehicles and food and drink were more positive about their new order in-take over the quarter.

There are, however, some reasons to be more optimistic about exports as companies are starting to report an improvement in demand in European markets. This comes on the back of slightly stronger economic indicators across the region in recent months. The change in sentiment towards Europe was particularly marked in electronics and motor vehicles. This trend could finally contribute to a strengthening in export moving into the second half of this year.

Overall, EEF forecasts continued growth across manufacturing this year, with output expanding by 1.5% supporting modest growth in employment levels and investment.

EU Focus – The European Fund for Strategic Investment (EFSI)

When Jean Claude Juncker, the European Commission President came to power last year he set out a list of 10 priorities for his 5-year term, known as his Political Guidelines. At the centre of these guidelines is a commitment to boost for jobs, growth and investment in the EU. As the guidelines set out, the ‘top priority is get Europe growing again and to increase the number of jobs without creating new debt.’

EU levels of investment have fallen significantly through the economic crisis in the EU, down by over €430bn since a peak in 2007. For this reason, President Juncker has tasked his Commission with bringing forward a significant investment package to get Europe growing again and get people back to work. The programme has been designed as a three pronged approach and aims at removing barriers to investment in the EU.

The first of these will be the European Fund for Strategic Investments (EFSI) which aims to deliver €315bn of public and private investment over the next 3 years. The fund will be seeded by the Commission with an EU Guarantee of €16bn and an additional €5bn the European Investment Bank, this €21bn fund is expected to be leveraged 15 times supporting private investment. The fund will be set up within existing EIB Group structures, allowing it to start quickly.

The second of the 3 parts of the programme will focus on ‘supporting investment in the real economy’ and bring a clearer vision of viable projects and more transparency to the decision of which projects will receive funding. Two main focuses have been agreed for the fund: Infrastructure and Innovation, and SMEs, supporting investments from broadband and energy networks to companies with fewer than 3000 employees. Central to this part of the programme will be the creation of an EU portal which will list projects aimed at bringing real added value to Europe's economy. The plan also foresees the establishment of an investment advisory hub to help identity and support projects.

Finally, the Commission will focus on the need to create an investment friendly environment in Europe. The Commission’s analysis has shown that closing gaps in the single market and exploiting its full growth potential could possibly generate at least an additional 11% of EU GDP. A key focus will be improving access to finance for SMEs.

The new programme is open to any company or nation. Applicants will be able to submit projects directly to the relevant channel, with the Commission’s aim of having the programme up and running by January 2015. For more information visit the European commission website.

All text provided by EEF, the manufacturers organisation.

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