UK manufacturers are increasing pressure on the government over industrial strategy

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Manufacturers have warned that the UK government must keep its promise of an effective industrial strategy to offset the rising employment costs imposed by chancellor Rachel Reeves in last October’s budget.

A post-budget survey of senior manufacturing executives found that 57 per cent believe a long-term industrial strategy will lead to increased investment, despite near-universal concerns about higher wages and costs the energy.

“The pressure on the incoming industrial strategy will now be even greater to set investor confidence on a growth path,” warned Make UK, the manufacturers’ lobby.

High expectations for the industrial strategy come as Whitehall braces for what government officials they warned it will be a brutal spending review, as UK public finances have come under increasing pressure from bond markets in the past week.

A senior Whitehall official said there was now a growing risk of a mismatch between industry expectations of the industrial strategy and what was deliverable, given the lack of government money available for seed funding outside of core missions, such as reaching net zero or strengthening the defense.

“Unless it’s for tanks or windmills, there’s virtually no money,” the Whitehall official said.

The survey of 161 manufacturing executives joined those from other leading trade groups, including the CBI and British Chambers of Commercehighlighting the impact of Rachel Reeves’ decision to raise employers’ national insurance contributions.

More than 90 per cent of respondents said that employment costs will be their highest expenditure for the year ahead, as a result of the increase in NIC, the expansion of entitlements work and the increase in the national living wage.

As a result, the survey found that businesses would seek to cut costs and raise prices, adding inflationary pressures to the economy. “This will be painful for both their customers and their staff,” Make UK added.

However, despite the gloomy outlook, the survey identified “increased optimism” that the planned publication of an industrial strategy in the spring could cause “a game changer for investment”.

The Labor government announced his industrial strategy last October, publishing a plan to target eight sectors, including advanced manufacturing, clean energy and life sciences, in an attempt to boost investment and drive economic growth.

A senior executive at carmaker Nissan said the publication of the industrial strategy was “crucial to the future” of UK car design and manufacturing.

“Global competition for investment is at an all-time high and it is clear that UK manufacturing is at a turning point. Countries that can demonstrate a clear long-term strategy, supported by policies that foster an attractive investment environment, they will be first in line,” the Nissan executive added.

The strategy will be overseen by a 16-member Industrial Strategy Advisory Board chaired by Clare Barclay, CEO of Microsoft UK. Other members include the Rolls-Royce chair Dame Anita Frew and Greg Clarkthe former Conservative business secretary.

Whitehall insiders said the consultation on the shape of the industrial strategy, which closed in November, had it drew a great response from the businesswith more than 3,000 responses submitted to the Department for Business and Commerce.

UK chief executive Stephen Phipson said more detail was needed in areas such as skills and regional devolution policy.

“The government has taken a major and positive first step, but it must now support this by establishing the immediate and significant priorities it contains given the very clear benefits that the producers believe it will bring,” he added.

Industry minister Sarah Jones said she welcomed the confidence shown in the potential of the industrial strategy. “We will continue to do everything we can to promote the UK’s leading industries to global investors,” he added.

Data visualization by Amy Borrett