World Economy

UK Industries Warn Gov’t

UK Industries Warn Gov’t UK Industries Warn Gov’t

Britain is becoming less competitive as a base for manufacturers, according to a group representing the factory sector which warned the government against laying further costs on firms which make cars, chemicals and other goods in the UK.

EEF, which represents 5,000 firms engaged in manufacturing, engineering and technology, said 56% of respondents in a survey it commissioned viewed Britain as a competitive location for making goods, down from last year's 70% level, Reuters reported.

Britain's economy has grown faster than those of most other rich countries over the past two years. But growth has been driven by the services sector and manufacturing has fallen short of the government's hopes for an export-led recovery.

"This is a wake-up-call and I would urge the government to continue to work proactively with industry to mitigate risks and boost opportunities for our sector," EEF's chief executive Terry Scuoler said.

EEF chief economist Lee Hopley said the survey reflected growing concerns about rising labor costs and regulations.

"It is really important that businesses have a lot of confidence that we are focused on forging ahead with a competitive manufacturing base in this country," she said.

Greater Risks

Last month, the Confederation of British Industry, an employers group, said politicians risked intervening too much in the job market after Finance Minister George Osborne announced a new, higher minimum wage and a new levy to fund apprenticeships.

Of the 286 executives who responded to the EEF survey, which was conducted in November, 36% saw upwards pressure on business costs as a possible risk to growth this year.

Just under half the manufacturers polled saw more risks than opportunities in the year ahead. Big movements in exchange rates were cited as a risk by 42% of manufacturers, reflecting concern about the appreciation of sterling in recent years. That was followed by potential economic volatility in a major market for British exporters.

Turmoil in Financial Markets

Recently, Osborne warned of the risks to the UK from the shaky global economy, saying 2016 has opened with a “dangerous cocktail of new threats”.

The chancellor was using a speech in Cardiff to say that the turmoil in financial markets that saw 5% wiped off oil prices should act as an antidote to the “creeping complacency” that Britain is immune from what is happening in the global economy. (On January 5, the cost of Brent crude dropped by 5% during trading in London to stand at $34.60 a barrel)

In a clear swipe at Jeremy Corbyn’s Labor party, Osborne said: “Our antidote is to go on putting our own house in order here in Britain, so, far from ‘mission accomplished’ on the economy, 2016 is the year of ‘mission critical’.”

Speaking on BBC Radio 4, Osborne struck a markedly different tone from the autumn statement, when he said Britain’s books were healthier than expected. He said: “The whole purpose of the autumn statement–and indeed the budget that came just before it–was to put in place a four-year plan to restore our public finances to health, to make our economy more productive, to make businesses more competitive so they can create jobs."

The chancellor’s address to business leaders in Wales follows a slackening in UK growth since last spring’s general election and a traumatic start to the new year on financial markets. These have seen steep drop in share and commodity prices amid concerns about weak growth in China and North Korea’s claim to have exploded a hydrogen bomb.

Services Sector Slows

Growth in Britain's dominant services industry slowed slightly in December, suggesting the economy expanded only modestly ahead of a new year in which it faces significant risks, a closely watched survey showed last Wednesday.

British economic growth slid to its joint-weakest in nearly three years in the three months to September, and financial data company Markit said its December survey of purchasing managers pointed to only a marginally faster expansion in late 2015.

The Markit/CIPS UK services purchasing managers' index edged down to 55.5 last month from 55.9 in November, broadly in line with economists' forecasts in a Reuters poll, while a broader composite measure dipped to a three-month low.

Markit lowered its estimate of fourth-quarter GDP growth to 0.5% from 0.6% a month ago, which compares with a sub-par 0.4% recorded in the third quarter of 2015.