The productivity puzzle is a long-standing issue, but it’s one Chancellor Rishi Sunak focused on addressing during his speech at the 2022 Mais Lecture. Outlining his vision of a ‘New Culture for Enterprise’, he wanted to prioritise three things in a bid to tackle the UK’s infamous low productivity:
🧩 We agree that each of these are important pieces of the productivity puzzle - but what does it mean for UK manufacturing?
Capital because UK manufacturing is capital-intensive and requires manufacturers to be able to invest in order to drive efficiency and productivity. People because our research shows the average manufacturing worker produces £61.71p per hour in output making them 54% more productive than the average UK worker. And ideas because two-thirds of UK research and development comes from the UK manufacturing sector.
💼 It also matters because it gives us some inclination as to what we are likely to see announced at the Spring 2022 forecast statement, on 23rd March.
Make UK have long argued that initiatives such as the Super Deduction were positive as it increased investment in the immediate term, but digging into the data, what it was doing was bringing forward existing investment plans. In order to address long-term issues, it needs to be extended to be available for 5-10 years - giving manufacturers the certainty to make sizable investments.
And the theme of thinking longer-term also applies to the apprenticeship levy. Reluctant to make any significant changes to the Apprenticeship Levy, instead tweak around the edges of policy, we have seen apprenticeship starts tumble. Rethinking the pipework behind the Levy system is a must if we are to have an Apprenticeship Levy that is financially sustainable.
We’ll be submitting our response and ideas to the Chancellor ahead of this with our calls of Government.
🔜 A low-tax economy might be a great ambition, but the realities facing businesses and individuals right now make it somewhat a distant dream.