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Make UK backs Labour’s industrial strategy, sees surge in investment potential

October 21, 2024

The Labour Party’s proposed industrial strategy has garnered strong support from Make UK, the leading trade body for the country’s manufacturing sector.

The organisation believes that a well-executed plan could drive billions of pounds in investment and significantly boost the reshoring of manufacturing operations to the UK.

According to a survey conducted by Make UK, 70% of its members expect the reshoring of their activities to accelerate in response to Labour’s industrial strategy green paper, titled Invest 2035: The UK’s Modern Industrial Strategy. The strategy outlines Labour’s commitment to providing long-term stability for businesses, promising to create a policy environment that encourages planning for not just the next year, but for the next decade and beyond.

A key feature of the strategy is the establishment of a standing industrial strategy council, which will ensure consistency in policy and prevent the short-term changes that have often undermined industrial planning. The strategy also focuses on supporting eight key growth sectors where the UK excels: advanced manufacturing, clean energy industries, creative industries, defence, digital technologies, financial services, life sciences, and professional and business services.

Massive potential for growth in UK manufacturing

Make UK believes the potential impact of Labour’s strategy could be transformative. The organisation estimates that UK manufacturing, currently valued at £217 billion, could grow to 15% of GDP, adding a further £142 billion to the economy. Current industrial investment stands at £38.2 billion per year, but Make UK suggests that reshoring overseas operations and boosting UK-based investments could substantially increase that figure.

Fhaheen Khan, senior economist at Make UK, expressed enthusiasm about the opportunities presented by the strategy. “Manufacturers are poised at the starting blocks for the government to unleash the benefits to investment that firing the starting gun on a long-awaited industrial strategy will bring,” he said.

Khan highlighted the benefits this would bring to the sector, particularly in terms of automation and digital technologies, as well as the recruitment of higher-skilled workers. He also pointed out that with the US, Europe, and China ramping up their investment in green technologies, the UK needs to move quickly to stay competitive.

Priorities for manufacturers: investment, automation, and exports

The Make UK survey of its members revealed that industrialists have a clear set of priorities, including greater investment in UK facilities, more automation, and an increased focus on research and development. Manufacturers also see exports as a key growth area, with a strong push to increase trade with the European Union in the post-Brexit landscape.

Fiscal incentives are high on the agenda, with over half of respondents indicating that a reduction in corporation tax would have the most significant impact on investment. Expanding capital allowances to include software and extending full expensing to leased and second-hand machinery were also seen as crucial steps to boost industrial investment.

Obstacles to investment: high interest rates and fiscal measures

Despite the optimism surrounding Labour’s industrial strategy, manufacturers face significant challenges, particularly high interest rates. Make UK’s survey found that interest rates have been the biggest obstacle to investment for many companies, and there is hope within the sector for further Bank of England rate cuts to alleviate this pressure.

Manufacturers also emphasised the importance of aligning with international efforts, particularly in green technologies. With the US, Europe, and China moving swiftly to boost investment in green industries, the UK must keep pace to ensure its long-term competitiveness on the global stage.