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Can Labour cure Britain’s industrial disease?

Manufacturers are crying out for a long-term strategy. The government won’t supply one. Can the Labour Party step in?

More than two-thirds of those surveyed think a proper strategy would support investment in labour and skills. Photo: Geoff Caddick/AFP/Getty

The Conservative Party used to pride itself on being the “party of business”. It threw away any right to that claim years ago, and British industry responded by absenting itself from the Tory Party conference in Manchester. They queued up for a stall at Labour’s conference in Liverpool instead.

It is not difficult to see why. It is not just that business thinks Labour can win; it thinks the policies they have heard so far from Keir Starmer and Rachel Reeves are more sensible than those from Rishi Sunak and Jeremy Hunt – although this is not actually a high bar to clear when you see how unimpressed the business community is with the current government.

You know there is something wrong when in a poll 99% of the businesses surveyed say that the country needs a proper industrial strategy. But that is the result of the latest report from the business consultants RSM and Make UK, which represents the manufacturing industry in the UK.

What they want is a long-term vision for industry, with decision-making taking place outside of government-termism and stretching across many years. That, they say, would provide a stable business environment in which key challenges like productivity could be addressed.

Manufacturers believe a properly thought-through industrial strategy would have clear benefits. More than two-thirds of them say it would lead to greater investment in labour and skills, almost two-thirds say it would aid investment in R&D, and almost half say it would support investment in decarbonisation and net zero.

Let’s be clear about the people who answered this survey. They are not the type who long for the heavy hand of socialism to guide them, or for a government that picks winners. They are red-in-tooth-and-claw industrialists.

But they look at the world around them – a world where Joe Biden is throwing hundreds of billions at the chip industry and EV battery factories, where China is stealing a lead in new tech and where even the supposedly sclerotic EU has a green plan – and they despair. Every country in the world, except for the UK it seems, can see that the future is green. A strategy to encourage research, skills training, and investment in areas such as wind power, solar energy, electric vehicles, batteries and decarbonisation should be a no-brainer.

I should do some full disclosure at this point: I produce and present podcasts for Make UK, but I think any journalist would look at this report and really wonder where we – or more accurately, the government – have gone wrong.

Leaving aside Brexit, which has been as much help as a hole in the head, this government has been in power for 13 years and seems to have made things worse for the wealthmakers, not easier. Some 44% of those questioned think the UK’s tax and regulatory system is “unfavourable”. You might think this is the normal whingeing of those who expect tax cuts at every turn, but look at the details.

UK manufacturers think our tax and regulatory system here is worse than those in France and Germany. That’s no surprise – it is far worse. But they also think the Italians have a better tax and regulatory system than us, and they think the UK’s system is worse than that of communist China.

The specific gripes are really interesting. They are about the government chopping and changing tax breaks, investment allowances and regulations almost at will. EU regulations were to be abolished, now they are being retained. More than half of manufacturers find it burdensome to understand and apply tax reliefs and exemptions. If the regime were improved, two-thirds say they would invest more in skills and 61% would increase investment in innovation.

This is not a fanciful wish list of impossible, costly demands. It is just a matter of having a reliable, simple and consistent set of rules. It is not asking for much.

And don’t get manufacturing industry started on the subject of infrastructure in the UK. Most makers say both local and national infrastructure are now worse than they were 10 years ago. For a supposedly advanced economy to actually go backwards is quite an achievement, but 13 years of Tory rule has managed it.

Half of manufacturers say not having good infrastructure is a barrier to accessing skills and labour, and one-third say it is slowing down decarbonisation. Instead, they want the government to provide better roads, a better internet and a better national grid, which needs several billion pounds of investment so it can start connecting to wind farms, solar panels and other green projects. Many companies that generate their own electricity on-site would love to sell excess production – but you try getting a modern connection that works.

Firms want better access to skilled labour, a victim both of the end of free movement after Brexit and of the shambles the government has made of the apprentice levy, which has decimated the numbers being trained. They want better support for innovation, so that they can expand and develop new products.

They want consistent, long-term incentives to invest in R&D and in new equipment and facilities. Not one-off special tax breaks that appear and then disappear before you can use them properly. The fact that 54% believe that frequent changes to R&D and investment incentives over the last three years have made it more challenging to plan investments – only 16% feel the changes have allowed their business to increase investment – is absolutely damning. In the middle of an economic crisis, this government has managed to make it harder for companies to invest.

As a consequence, they are asking the government to have just one budget a year rather than two. Abolishing the autumn statement would be a blessing to one and all – the idea that a sensible, forward-looking government cannot go six months without fiddling with the tax system is ridiculous.

They also want a simple system of regulations and tax rules, not one that changes every year and not one that only large companies have the time and resources to study, understand and use to their benefit.

Above all, though, they want a proper industrial strategy. They want a government with a credible plan. It should be top of the political agenda, but at the moment even that is far too much to ask of this government.

British industry is already beating a path to Labour’s door. If it were to simply promise to create an industrial policy that simplified regulations and tax to encourage investment and skills, and then promised again not to fiddle with the system for the lifetime of a parliament, it would be crowned the new party of business.

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