Will the New Government support UK Manufacturing?

The Labour Party’s landslide victory offers a glimmer of hope. Their manifesto promises to revitalise the manufacturing sector, aiming to create a stable and prosperous economy. Pledges include developing a robust industrial strategy, investing in skills development, and positioning the UK as a global leader in green energy. These goals are commendable, but can they follow through?

One standout promise is the creation of Great British Energy, a publicly-owned energy company aimed at accelerating the UK’s transition to renewable energy. The vision is ambitious, with plans to invest in technologies like floating offshore wind, hydrogen, and tidal energy. This initiative could play a pivotal role in boosting the UK’s green manufacturing sector by creating new opportunities for innovation and investment.
 

Can they follow through?

However, questions remain about how this entity will function alongside private developers. There is a risk it could crowd out private investment or struggle to attract sufficient funding, leading to delays or compromised outcomes. Without adequate capitalisation, Great British Energy risks becoming another underfunded government project, potentially doomed to mediocrity like HS2 and the Millennium Dome. If Great British Energy falters, will the government’s entire green agenda crumble with it?

Labour’s commitment to a National Wealth Fund, a multi-billion pound initiative aimed at driving investment in critical industries, suggests a government willing to take bold steps. The fund, which has already allocated £7.3 billion to invest in sectors such as manufacturing, ports, and renewable energy, aims to catalyse growth by partnering with private investors to develop the “industries of the future.”
 

A pivotal moment for industry

However, concerns about its execution loom large. Like previous government ventures, it could become mired in political grandstanding, with investments swayed by fashionable but unproven technologies. The risk of the fund backing “lame ducks”— unprofitable or unsustainable projects—also looms. If the National Wealth Fund prioritises political optics over economic analysis, could it end up wasting taxpayers’ money while failing to generate robust returns?
 

Higher taxes could undermine stability

The early signs are mixed. Hints from the Chancellor’s office about potential tax increases to address a significant £22bn shortfall in public finances have raised alarm bells. While fiscal responsibility is important, higher taxes—particularly on businesses— could undermine the stability manufacturers need to plan. The industry, particularly SMEs, relies on predictable financial conditions to make long-term investments. Uncertainty around taxation, coupled with challenges such as rising energy costs and supply chain disruptions, could dampen the sector’s growth prospects.

The new government is at a crossroads. They have an opportunity to implement a strategy that stabilises the manufacturing and engineering sectors and propels them into a new era of growth. However, this will require more than just high-profile announcements. It will demand a genuine partnership with industry leaders, a willingness to listen to businesses’ needs, and a healthy dose of economic good luck.

For more information, get in touch with your local ERIKS Service Centre who will be happy to discuss your options.

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