Industrial Strategy set to bring investment boost – Make UK and RSM UK survey

The recent announcement of a long-term Industrial Strategy is set to give a significant boost to the UK economy, with over a third of manufacturers eager to ramp up their investment projects as a direct consequence. This insight comes from a comprehensive annual survey on investment priorities released today by Make UK and RSM UK.

However, both Make UK and RSM UK are urging the Government to leverage the upcoming Budget not just to safeguard essential investment incentives but to expand them even further. The survey reveals that nearly 40% of companies make their investment choices based on the availability of tax incentives, highlighting just how crucial these incentives are for UK manufacturing.

Here are some key takeaways from the Make UK and RSM UK survey:

• 37% of companies plan to boost their investment following the announcement of the Industrial Strategy.
• The primary areas of focus for planned investments are decarbonisation, AI, and digital technologies.
• Almost four in ten firms consider the availability of incentives when making investment decisions.
• Investment intensity has dropped to its lowest point since the EU Referendum.
• Confidence in domestic demand is the main driver of investment, while frequent changes to tax policy continue to pose a significant challenge.

These findings come at a time when investment intensity in manufacturing has plummeted to its lowest level since the immediate aftermath of the EU Referendum in 2016, underscoring the delicate state of business confidence.

Fhaheen Khan, Senior Economist at Make UK, shared his thoughts:

“Manufacturers have been advocating for a solid industrial strategy for quite some time, and it’s evident that this could lead to immediate benefits by speeding up investment projects. However, we find ourselves at a crucial point for investment, and there’s a genuine sense of urgency. The upcoming Budget needs to not only protect existing incentives but also enhance them with targeted measures aimed at promoting the adoption of advanced technologies and innovation. Additionally, it’s essential that the statement puts an end to the frequent tax changes we’ve witnessed in recent years by establishing a stable business tax regime for the duration of this Parliament.”

Mike Thornton, Head of Manufacturing at RSM UK, chimed in:

“Even with the challenges ahead, UK manufacturers are staying positive. However, to truly transform, invest, and secure future prosperity, they need support from the government rather than more taxes. Simplifying the process is crucial. We understand that tax reliefs play a significant role in investment decisions, so the Chancellor has a fantastic opportunity to make these reliefs more accessible and easier to claim in the upcoming budget. This move will not only enhance investment but also foster innovation, boost productivity, and accelerate economic growth within the industry.”

The investment landscape in UK manufacturing is evolving, and this survey sheds light on the current trends and priorities.

Interestingly, over 43% of companies are leveraging the Industrial Strategy announcement to boost their investments in decarbonisation. Additionally, around a third of firms are focusing on data analytics and AI (35.4%) and ramping up their manufacturing capacity (34.2%).

When it comes to investment priorities for the next year, skills development has taken the lead, with 47.6% of companies highlighting it as their top focus, compared to 44.1% for plant and machinery. A significant portion of manufacturers (68%) allocate up to 10% of their turnover to plant and machinery, while 18% invest between 10% and 50%.

However, it’s worth noting that overall investment intensity has dipped to 6.8% of turnover, down from a peak of 8.1% last year, marking the lowest level since 2017.

A similar pattern is seen in research and development investments. More than two-thirds of companies (68%) invest up to 10% of their turnover in R&D, and nearly one in five (18%) put in between 10% and 50%. R&D intensity has also seen a slight decline, dropping to 6.2% from 6.5% last year.

This survey was conducted between July 23 and August 21, gathering insights from 170 UK manufacturing companies.