Spring Forecast 2025 Wish List: Manufacturing

Whilst it is a wish from the sector that the forthcoming changes to employer’s NIC and IHT rules on Business Relief for shares in trading companies are reversed or watered down, the rhetoric and information from government sources indicates that there are unlikely to be any significant changes to these rules. It is hoped that the Chanceller will relent and listen to the peers and exempt some of the smaller SME employers the increase which could benefit the supply chain for SMEs and their longer term competitiveness. The lack of recognition of the impact of these changes is disappointing from a sector perspective as it impacts on competitiveness and the availability of funds to invest in capital assets and innovation and also on the longer term potential for UK manufacturing entities.

Having issued a green paper in October 2024 for consultation with business, experts and other interested parties, it is hoped that the Spring statement and the forthcoming Industrial Strategy that is due to be published in the Spring will have taken on board these comments and recognised the key challenges facing UK business around skills, support for innovation and international competitiveness.

Geopolitical uncertainty and polarisation of global players is changing the economic landscape and with issues such as energy security and increases in defence spending there is a significant opportunity to support the UK manufacturing sector through effective procurement policies and to ensure that SMEs who have the ability to more agile and innovative can access opportunities and are not hindered by red tape that impacts on their commercial decisions to tender for opportunities. The increase in defence spending has the ability to unlock additional value for the UK manufacturing sector and it is important that this reflected in the Spring Statement.

The ONS statements published on 4^th March show that for transactions above £1m between 2022 and 2024 for the manufacturing sector the ratio between UK companies being acquired by overseas entities to UK manufacturers acquiring overseas entities is circa 4.8 : 1. The information suggests that the average transaction value is circa £38-£39m so these entities are primarily UK SMEs,  the Spring Statement and the forthcoming industrial strategy need to address this and the challenge of how to transition UK SME entrepreneurial businesses into larger global corporates particularly with the shift in attitudes to global security and its impact on the supply chain.

The US is the UK’s largest trading partner and with £182.6bn of exports to the US in the 4 quarters to the end of 2024, the statement and industrial strategy should address the steps that are being taken to maintain a positive relationship with the US and to minimise the risk of tariffs being levied on UK manufactured goods that are exported to the US.

There is a growing skills gap in fields like science, technology, engineering, and mathematics (STEM) which are critical to the future of the manufacturing industry particularly as many manufacturers see an ageing workforce as a challenge for the industry. The industry would welcome announcements focussed on investment in STEM education and implementation of measures to encourage interest in the industry together with increased collaboration with businesses to shape the educational agenda and to ensure school leavers have practical skills, including relevant technology skills, to enable them to transition seamlessly into the workforce.

The rapid pace of technological change creates both opportunities and threats and supporting manufacturers to exploit changes is critical to our industry remaining competitive on a global scale and it is important that this is recognised both in the Spring Statement and the industrial strategy. Grants or incentives from the government for investment or training would encourage more businesses to explore and implement these technologies and these should be combined with appropriate regulation balancing the requirement for protection with measures that do not stifle opportunity.