Report urges incentives for manufacturing in industrial heartlands

A report from economic think tank Onward has urged the government to lay out a national plan to boost economic prospects outside of London and South East England, including tax breaks for factories and additional investment in technology.

Rhetoric around 'levelling up' all regions of the UK played a part in the 2019 general election, which saw the Conservative Party make gains in the former northern industrial heartlands known as the 'red wall', due to their historical preference for the Labour Party. Now, pressure is mounting on the government to deliver on its promises to the regions from MPs, regional leaders and think tanks.

Onward’s Making A Comeback report focuses on boosting manufacturing: a sector which tends to pay better-than-average salaries. In 2018, median earners in the North East working in manufacturing earned 22 per cent more than the average worker, while in the North West it was 19 per cent more. This is the equivalent of an additional £2 per hour. With manufacturing maintaining a greater presence in the market in red wall seats, Onward called on the government to invest in the industry to support wage growth and economic opportunities far from London.

The right-of-centre think tank found that 12.2 per cent of workers in seats gained by the Conservative Party in 2019 work in manufacturing, compared with 9.3 per cent in seats they held in 2017 and 7.8 per cent among Labour seats. In regions outside London, productivity is improving more in manufacturing than in other sectors, with around 40 per cent of productivity growth in the West Midlands, Wales and North West between 1997 and 2017 coming from the sector.

The report calls for long-term funding for manufacturing R&D institutions; tax incentives for capital investment; action to reduce the cost of electricity in industry, and improved 5G coverage to assist the growth of smart factories. Will Holloway, deputy director of Onward, urged ministers to take action to usher in a “manufacturing renaissance in the UK”.

Earlier this month, the government announced that it had secured £1bn of investment from Nissan for a UK facility for manufacturing EVs and batteries. This will be based around Nissan's existing Sunderland plant. The total value of public subsidies offered to Nissan to help seal the deal remains unknown.

The Northern Research Group of 50 Tory representatives have, meanwhile, called for infrastructure investment in the North. Chair Jake Berry, who represents Rossendale and Darwen, told the BBC: “It’s time for the government to show the North some love with a summer of levelling up. It’s time to start delivering an ambitious programme at pace if we are going to see real progress this summer.

“Onward’s manufacturing report provides a clear plan for the future. For too long, we have just accepted deindustrialisation as inevitable. It isn’t. Levelling up requires skilled manufacturing jobs in the private sector. To get those, we need a plan to drive manufacturing growth and to have the ambition to achieve fundamental transformation. This report gives us an outline of how to get there.”

Verity Davidge, director of policy at industry body Make UK, said: “Today’s findings show that the UK manufacturing sector has an important role to play in reviving and rebalancing our economy in the months and years ahead.

“Key to delivering this will be ensuring the Government’s levelling up agenda focuses its investment towards the sectors that create good, stable employment and powering local economic growth – this means prioritising the needs of the UK manufacturing sector across our different regions. A national manufacturing plan to take this forward is the right step to delivering sustained economic growth in the next decade.”

A spokesperson for the government said: “We are committed to levelling up every region and creating well-paid, skilled jobs across the country. Our plan for growth provides a blueprint for the UK to drive economic growth in every region and sector, including manufacturing. This will create jobs and support British industry as we build back better out of this pandemic.

“We keep all taxes under review and the Government will continue to help manufacturing to adapt and grow, including through research and development tax reliefs to incentivise companies to invest in new technology.”

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