CBI claims manufacturing sector needs Budget boost
Confidence in the manufacturing sector has dropped for the first time since 2016, prompting the Confederation of British Industry to issue a warning.
Small and medium sized manufacturing firms have displayed a concerning lack of optimism on the back of business rate increases, rising costs and labour shortages.
The CBI has claimed that rates reform is needed in the forthcoming Budget in order to boost confidence in the UK manufacturing sector.
They state that although the number of new orders is growing, capacity pressures are causing a number of small manufacturers to struggle.
The proportion of those firms that report they are operating below production capacity is at its lowest level for 28 years, while those saying that labour shortages are inhibiting investment is at the highest point since 1988.
It is also suggested that many manufacturers are finding it difficult to pass rising costs onto their customers, meaning they are facing pressures on their cash flows.
Job and hiring intentions are still robust, but the CBI’s principal economist, Alpesh Paleja, has warned that the survey suggests “mixed fortunes” for the UK’s smaller manufacturing firms.
The Federation of Small Businesses has already called for reform of the current business rates system in order to boost smaller firms, and the CBI has seconded that motion.
“The chancellor should use the budget to fire up factories by reforming business rates and setting out a clear plan to bring the UK’s industrial strategy to life,” Mr Palaja said.
More frequent rates revaluations and an end to the so-called ‘staircase tax’ are both aspects that could help small firms, the FSB has claimed.
The latter could see rates bills increase by a considerable amount for some firms, while others that were previously exempt may now have to pay for the first time.
Described as a “living nightmare” by FSB chairman Mike Cherry, it is unclear if the business rates set up will be reviewed.
However, for the smaller manufacturers and other businesses facing hikes, the risk of insolvency and financial trouble continues to rise.
The key for those businesses facing tougher times is to seek appropriate professional assistance from corporate recovery specialists at the earliest opportunity.
By Phil Smith