Reform regulations and business tax to help 'balance' the economy

9 March 2010

The government has been called on to adopt a new approach in order successfully to rebuild and rebalance the UK economy.

The call has come from the EEF, the manufacturing employers' organisation.

At the centre of the change must be a shift towards a tax and regulatory system that makes it easier for firms to innovate and invest, the EEF claimed.

Announcing the group's 'manifesto for manufacturing', Steve Radley, the EEF's director of policy, said: "At the start of the last decade, the EEF warned that the UK's economy was at a crossroads: either we grew our manufacturing base or our economy would suffer.

"After a painful and prolonged recession, the UK is back at that crossroads. We need to look again at what sort of economy we want in the future and how we get there. By putting manufacturing at the heart of healthy economy, our manifesto is a clear, practical strategy for building a more prosperous Britain."

The EEF offered a series of specific measures it wishes to see implemented in order to create a more supportive business environment.

The UK's labour market needs to be made more flexible, the EEF argued. That means maintaining a default retirement age and retaining the individual opt-out from the Working Time Directive.

It also needs to be more skilled. Priority should be given science and technology subjects, and the overly-complex training landscape must be simplified.

Another area that requires reform in the EEF's view is the tax system, which should be both competitive and predictable. In particular, the Capital Allowances regime should be overhauled to reflect the true cost of modern machinery.

On the issue of business innovation, the EEF argued the case for creating a single source of finance to support ambitious, growing companies and to enable businesses to collaborate with universities. Funding for business support schemes should be focused on those that deliver the greatest benefits.

Mr Radley continued: "UK manufacturers are successful despite operating in a business environment that actively discourages their investment and growth. Subtle, yet inherent biases against manufacturing in the tax, regulatory, skills and finance systems must change if we're going to rebalance our economy."

But the EEF added that getting the business environment right is only part of the job.

Mr Radley concluded: "Manufacturers need confidence to continue to make long-term investments in the UK; in new capacity, in modern machinery, in their workforce and in innovation. The real challenge is using government's influence to send the right signals to would-be investors who are making decisions so as to encourage investment here in the UK."