Stephen Phipson CBE, Chief Executive of EEF, the manufacturers’ organisation said an extension to the implementation or transition period was now vital.  International trade negotiations often take over 5 years and we are only at the beginning of this process.

The Government has failed to prepare adequately for the time and complexity required to reach agreement with the WTO. Whilst talks continue industry urgently needs clarity and stability. That means a significantly longer transition period following our exit from the EU.

This will ensure UK manufacturing can continue to operate under the EU’s existing protections while the Government takes the time it needs to secure advantageous new trading deals with other countries.

Manufacturing employs 2.8 million people in the UK accounts for close to half of all exports: the implications for companies, jobs and the families who rely on them are significant.

Commenting, Stephen Phipson added: “As we have consistently said, successful international trade deals take years to negotiate. The Government’s hope that agreeing a tariff schedule with the WTO would be simple was naïve. At a time of rising protectionism and the return of barriers to trade it is no great surprise that other countries have refused to accept our ‘cut and paste’ short-cut.

“Many of our members have been planning on the back of repeated assurances that membership of the WTO and new trading deals with other countries would be struck quickly and easily. Now the Government must recognise that this strategy has failed and it must allow industry sufficient time to prepare for an uncertain global trading relationship. We must not give up all the benefits of the EU."

According to EEF there is a significant gap between where the workforce is now and where it needs to be. With employers installing robotics and automated systems in factories there is an essential need to develop the right skills to work alongside this technology in a manufacturing environment.

Employers will need a multi-skilled workforce able to adapt to these new systems and solve a wide range of issues that may arise in a day to day operation.
 
EEF’s course lasting 8 weeks will include:

• Mechanical and Electrical maintenance of automation
• Robot processes and functions
• Automated control systems
• Machine software design
• Robot programming
• Simulation engineering

The course is aimed at employees with existing knowledge in manufacturing, those who wish to learn about robotics and automation engineering, as well as technicians and engineers who wish to enhance their skills.

The course takes place at EEF’s Advanced Technology Training Centre in Birmingham, which has state of the art robotics cells. For further details about the qualification or to discuss your technical training needs call 0845 293 9850 or email [email protected]

While we welcome the increased clarity for businesses, we urge Government to publish the remaining notices as soon as possible so companies can have the full picture of what a no-deal scenario will mean for them.

The decision to allow importers to defer VAT payments is very gratefully received and is something EEF has been campaigning hard for with Government in order to protect the 145,000 businesses in the UK which are above the VAT threshold.

To help manufacturers, EEF is today launching a dedicated Brexit hotline to help companies understand the implications of the technical notices. Our Brexit experts are currently analysing today’s technical notices and we will be publishing easy-to-understand summaries on our website over the coming days.

While it is clearly prudent that Government plans for a no-deal Brexit scenario, we remain confident that Government will secure a deal with the EU and will continue to work with ministers to help secure this.

The hotline can be reached on 0808 168 5874

According to EEF, new digital technologies are rapidly transforming European manufacturing, with investment in 4IR technologies being vital to achieving a step change in UK manufacturing productivity given performance has flat-lined in the decade since the financial crisis.

Published as a fact card, How 4IR is transforming manufacturing productivity, the result of the survey show the majority (57%) of manufacturers are yet to make investments and only one in four companies see the UK as being in a 4IR leadership position. According to EEF, barriers are standing in the way of additional investment and industry and government need to do more work together to overcome these as part of the industrial strategy.

Commenting, Chris Richards, Head of Business Environment Policy at EEF, said: “New digital technologies are rapidly transforming manufacturing and are key to boosting improvements in productivity. While there has been some progress and more companies are both aware of, and investing in, 4IR it is clear that we are still some way off a majority engaged in adoption.

“The reasons for this patchy uptake depend on where firms are on their 4IR journey, but include a spectrum of challenges. These range from skills and technology compatibility to company culture and finance. Government and industry need to work together to ensure the UK benefits from the productivity benefits 4IR technologies can offer.”

According to the survey, almost two thirds of companies (64%) say they are familiar with the concept of 4IR which compares to 42% in 2016. This progress is also highlighted by the fact 43% of companies have moved beyond the initial ‘conception’ phase examining how 4IR may help and what others are doing, to the ‘evolution’ phase where current business practice is optimised with new technologies.

The survey also shows the move to a more advanced form of 4IR investment for companies is seeing significant benefits being expected or realised in terms of improved labour efficiency (35%), improved machine utilisation rates (34%) and increased production flexibility (32%).

However, the survey also shows that significant barriers still remain in the way of a digital future. In particular lack of skills within business for implementation tops the list for 88% of companies, although breaking down by phase, for those doing nothing on 4IR the biggest barrier is not understanding how technologies can help the business.

Of those investing the most in 4IR, skills becomes less of an issue as the biggest barrier is data compatibility between systems (42%).

According to EEF, policy makers can’t be timid, as a separate survey of the public shows only 26%* say we shouldn’t adopt new technology if it means jobs will be lost. While there has been some positive progress in recent months in areas such as delivering the full fibre digital infrastructure that 4IR will depend on, progress is still desperately needed. In particular, Government should:
·         Announce plans for the Made Smarter Commission, delayed since February.
·         Back the industrial strategy challenge fund wave 3 bid for industrial digitisation. This will help address the lack of understanding about the benefits of new digital technologies.

The call comes on the back of the cost estimates released last week by HMRC to the Treasury Select Committee and a recent visit to Canadian Customs by EEF Chief Executive, Stephen Phipson. During the visit Phipson was able to see at first-hand how technology operates across the US/Canada Border.

In a letter to the Business Secretary, Greg Clark, Phipson revealed that despite a decade of substantial investment on both sides of the Border by two willing partners only 100 of the most trusted Canadian companies are able to use a ‘fast track’ system across the Border. The vast majority of goods are still subject to normal customs checks.

In response, Phipson is calling on the Government to stop wasting public money and precious time examining an option for ideological reasons which is unrealistic and, instead, put all its collective resources into finding a solution which is workable.

Commenting, Phipson, said: “UK manufacturers operate highly complex integrated supply chains with Europe, which rely on “just in time” delivery. Think about the Dover-Calais route. When the police have to implement Operation Stack to deal with industrial action there are queues for miles that bring Kent to a standstill. If we had to put every lorry through even a modest customs check the tailbacks would stretch from Dover to London and Calais to Paris”.

“Much of the debate on MaxFac is misguided. No one doubts the technology exists: it is in place in many locations around the world. The issue is whether it is good enough to provide a frictionless border and can be implemented quickly enough to be ready for December 2020. I think that the answer to this is an overwhelming no. It may have some long term benefits, but suggesting MaxFac is a solution to our immediate problems is a non-starter.

“I have been to the US and Canada border and the reality is that most Canadian SME businesses can’t easily access the MaxFac arrangements. Whilst some do qualify for a streamlined process, the majority are still subject to the full customs check. The Canadian process is particularly efficient and well managed, but the reality is that this is time consuming and at busy times often has long delays. Apply that to Dover and the consequences are horrendous.

“We recognise Government has a difficult job and it is not for us to tell Government what the new arrangements must be – that is a political decision. But that political decision has economic consequences for thousands of British businesses and real financial implications for the millions of people who work for them and the entire country who rely on their products. We have an absolute responsibility to highlight fundamental flaws in one of the options that still remains on under serious consideration. I hope that the Government now recognises that one of these options is simply not credible. We need to put all of our resources into developing a workable solution, and quickly.”

The Opposition leader will set out his vision for industry and the economy and will address delegates and take questions about his plans for a future Labour Government.

Mr Corbyn has described Labour as ‘the Government in waiting’ and he will outline Labour’s proposals to EEF delegates on Brexit and Britain’s global positioning. The Labour leader will also map out the party’s economic plans which he says will offer hope and change to an economic system that “simply is not working”.

During his presentation at this year’s conference “Global Britain: Change, Opportunity, Growth”, he will also take questions on what Labour believes is the best way to forge a safe path through these challenging political times and party’s vision for the future of British manufacturing and engineering.

The flagship annual event – sponsored by Lombard, the UK’s largest asset finance provider – brings together Britain’s leading Government politicians, senior industrialists and manufacturing leaders in these challenging political times.

Other high-profile speakers have been lined up, including Martin Wolf CBE, chief economics commentator at The Financial Times alongside Greg Clarke, Secretary of State for Business, Energy and Industrial Strategy.

Key themes up for debate include the smart energy revolution, coping with a post-Brexit workforce and trading with the EU. With the ever-increasing threat to business from cyber-attack, Ewan Lawson, cybersecurity expert from RUSI will chair an interactive session.

The flagship annual event – sponsored by Lombard, the UK’s largest asset finance provider – brings together Britain’s leading Government politicians, senior industrialists and manufacturing leaders.

Terry Scuoler, Chief Executive of EEF, the manufacturers’ organisation, says: “With Brexit on the horizon, our conference comes at a critical time for industry, which has a key role to play in ensuring that post-Brexit Britain is a great success.

“This conference provides an important collaborative platform for industry and Government to work together and to hear what Opposition politicians are thinking. Government departments across the Brexit agenda must continue to work hand in hand with industry in order to tease out the best way forward as we form the post Brexit landscape.”

Ian Isaac, Lombard MD, says: “We are once again proud to be headline sponsor of EEF’s National Manufacturing Conference – bringing together Britain’s most influential manufacturing and engineering companies. We continue to recognise the importance the manufacturing sector has on the wider UK economy, and we are dedicated to supporting businesses by funding the equipment they need to innovate and grow.

“We look forward to welcoming manufacturers, industry leaders and leading politicians to the event as we come together to tackle the challenges that lay ahead and grasp the opportunities that come with those challenges.”

For more information or to register your place at the conference, visit http://www.manufacturingconference.co.uk/.

The call was made by EEF, the manufacturers’ organisation on the back of last week’s general election result and a survey showing that, even before the poll, companies were already altering, or considering altering, their business plans in response to the decision to leave the EU.

EEF believes that unless the Government alters its strategy to pursue a more pro-business stance which puts the economy, investment and jobs at the forefront of its negotiating position, the resulting political instability may force more companies to alter their business plans away from the UK.

Commenting, Terry Scuoler, Chief Executive of EEF, said: “The new Government’s priorities must radically re-focus Brexit negotiations around trade and close cooperation ensuring a smooth exit from the EU. There are numerous ways of establishing a new relationship with the EU and, given we’ve just wasted a year, the Government needs to move away from its previous rhetoric and start repairing relations with EU partners.

“This means putting access to the single market and a form of customs union at the heart of a revised strategy, and removing the shibboleths created around a hard Brexit, which businesses know would be highly damaging for Britain. The UK can surely manage who is and who is not in the country by introducing a more effective and robust form of immigration control which maintains the rights of EU citizens and UK citizens’ across Europe.

“With less than two years to negotiate a meaningful deal, the Government should commit to a significant period of transition to manage uncertainty for businesses and bolster confidence. Business groups can help with the negotiations over trade, which is the model every other Government involved in trade negotiations operates, and we need to be brought in quickly to do this. We need to build a political consensus based on our collective national interest.”

According to the EEF survey, taken before the election, almost a quarter of manufacturers had already reviewed their business strategy and are planning to make changes depending on the terms of any deal, whilst almost a half are waiting to see the terms of any deal before deciding whether to make any changes. Only a fifth of companies say they plan no changes to their business strategy.

The survey covered 244 companies and was conducted in April.
 

Publishing the Q2 2017 manufacturing outlook survey, EEF pointed to a continued confidence that manufacturing will enjoy further expansion into the second half of this year, despite response balances easing slightly from the results of Q1, defying any predictions that political uncertainty caused by a snap election and Brexit may impact on business confidence.

While the export performance does have a currency aspect to it, the survey showed that manufacturers’ views of demand prospects in exports markets have become steadily more positive over the past year. Demand in European markets looks especially buoyant with over three-fifths of companies (61%) reporting an upturn.

The survey also showed that, in contrast to recent years, positive output balances were reported across all sectors. However, those in the capital goods sector are performing especially well as global manufacturing intentions have increased. A good pipeline of orders across the industry is pushing up demand for new employees and recruitment intentions soared to the highest level in three years, whilst investment intentions were in positive territory for the third quarter in a row.

EEF warned, however, that the current sweet spot for the sector cannot be guaranteed given the uncertainty ahead, in particular the likely continued squeeze on household incomes and the possibility of no deal on Brexit which could damage trade. In response EEF is urging the new Government to press ahead as a matter of urgency with a bold industrial strategy to help cement long-term growth prospects for the sector.

Commenting on the survey, EEF Chief Economist, Ms Lee Hopley, said: “Our survey marks another quarter of positive news about growth prospects for UK manufacturers. Industry is reporting that output and orders have continued to head higher in recent months and the recovery in manufacturing globally is a big part of the story. It’s very encouraging that UK manufacturers have positioned themselves to capitalise on the windfall of a competitive pound and resurgent world economy.

“While growth and confidence hasn’t been knocked off track by the snap election, it is not plain sailing from here. There is the continuing challenge of managing input cost increases; ensuring success in attracting and retaining the skills that are in increasing demand and driving up investment in the sector. Whoever forms the next Government must set in stone as a matter of urgency a bold industrial strategy that will help cement the foundations for long-term growth for industry.”

Tom Lawton, Partner and Head, BDO Manufacturing, said: “The Q2 survey results present a very positive and exciting picture for manufacturing, showing increasing orders in both home and export markets. The continued growth in world markets such as Asia, North America and Europe are driving positive demand conditions. These results show yet again that manufacturing has the resilience and the qualities to form one of the foundations of a successful UK economy.

“Brexit does create uncertainty and it is important that the new government is clear that Brexit will be structured in a way that serves the best interests of business. As part of this it is vital that we remain open for business and negotiate new trade agreements with the EU and other key markets so that international markets remain open and accessible as soon as Brexit is completed.”

According to the survey, whilst output and orders balances eased slightly from Q1, they were still well above historical averages at 26% and 25% respectively (31% and 29% in Q1). The balance on export orders exceeded that of the last quarter, at 28%. This surge is expected to be maintained in the next quarter which will help compensate for an expected slight easing in domestic demand.

Looking forward, a net balance of companies expects the expansion to continue, reflecting a positive, supporting economic environment, both domestically and abroad.

This strong set of figures on burgeoning order books is reflected in a three year high balance for recruitment at 21% (17% in Q1), with balances in positive territory in all parts of the UK in the past three months. Whilst easing slightly from the two year high recorded in Q1, investment intentions remained in positive territory (7% compared to 12%).

The survey also reflects a strong performance from capital goods sectors which follows a prolonged period of decline following the collapse in oil and gas production. As global economic output increases across the board manufacturing investment coming back online sectors such as  mechanical engineering and electronics are all benefitting significantly from this upswing, mirrored in their employment and investment balances.

Last quarter’s expectations of further price increases didn’t materialise as the pass through of sterling depreciation modified and the uptick in input costs eased from earlier surges. This did have an impact on manufacturers’ profit margins on domestic sales which slipped further into negative territory. Similarly, profit margins on export sales were slightly negative.

In response to the continued improvement in economic conditions EEF has revised its forecasts upwards. Manufacturing is now expected to expand by 1.3% in 2017 and 0.5% in 2018 (1% and 0.1% in Q1) and GDP by 1.8% and 1.3% respectively (unchanged from Q1).

The survey covered 368 responses and ran from 3rd-24th May.
 

“We have significant negotiations to undertake with our partners in the rest of Europe and, doing this with a fresh and stable mandate from the country can only provide greater certainty about the future direction of travel for policy, and the potential to seek the best deal possible for the UK.”

The stark warning is made in a briefing paper - UK Trade with the EU: a new trading order for the manufacturing industry – in which EEF urges the Government to clarify its position on the customs union and customs arrangements.

It says that unlike a typical free trade-type negotiation where walking away simply means the continuation of the status quo with neither party losing out, this is not the case between the EU and the UK. Should the UK walk away with no preferential access to the EU or international markets in place, on day one of Brexit it would immediately find itself at a loss, with the UK’s manufacturing sector bearing much of the brunt.

The sector would be particularly vulnerable because the UK is currently the 9th largest industrial nation in the world, but its strength is underpinned by its trading relationship with the EU - 52% of all manufactured exports by value went to the EU in the 12 months to April 2016. The sector’s trading relationship with the EU is tightly interwoven and complex pan-European supply chains are commonplace, with some EEF members reporting that their production processes criss-cross European borders numerous times.

The briefing highlights ten ways in which manufacturers would be negatively impacted if the UK walks away without a deal, including the fact that average tariffs for manufacturing exports to the EU could be expected to increase by approximately 5.3%.

To mitigate the impact on UK manufacturing, EEF wants the Government to engage in close consultation with industry to set out the general approach, determine the right objectives and identify commercially significant issues spinning out from the negotiations.

As well as prioritising WTO membership, the body asserts that when leaving the single market key trading conditions must be maintained to ensure certainty and minimise costs. Any new customs arrangements must maintain frictionless trade by preventing both tariff and non-tariff barriers from springing up and ensuring the UK can strike trade agreements with the rest of the world.

As with other industries, a transitional period is deemed to be essential to allow the sector time to adjust to such significant changes to the trading environment.

Terry Scuoler, CEO of EEF, says: “The EU is our sector’s single biggest trading partner in a complex, tightly interwoven trading environment. Undermining the building blocks of this relationship – the single market and the customs union – without any other supportive structure in place would undoubtedly hurt our industry and condemn us to a painful and costly Brexit. The idea of being able to walk away empty-handed might be a negotiating tactic, but it would in reality deliver a risky and expensive blow. The rhetoric from the UK Government needs to focus instead on achieving a deal that will work for the UK and the EU.

“Close consultation between Government and industry is now vital if we are to successfully deliver a deal that supports trade and minimises costs and uncertainty. Brexit will be the most complex unravelling that any UK Government is ever likely to have to undertake and Government will need the help of industry to identify, understand and mitigate the implications.

“It is going to be tough, but we must focus on developing a strategic approach that aims to preserve frictionless trade while building a launch-pad from which the UK can secure ever more ambitious deals from around the world. Obtaining fully-fledged WTO membership is key, alongside a clear and well-considered UK position on customs arrangements and a sensible transition period. Together these would provide businesses with some much-needed certainty on which to base their own plans.”

The briefing paper can be read here.