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International law firm Eversheds comments on state of UK manufacturing industry

A report by industry body EEF and Royal Bank of Scotland has found that manufacturing in the UK is growing at the fastest rate since 1994 with 69pc of companies planning to increase capital expenditure. However, the report also warns that the lack of large manufacturers in the UK could hold back growth in the sector and that the UK tax system is often "biased against manufacturing." Robin Johnson, partner and head of the Industrial Engineering sector group at international law firm Eversheds, comments on the state of the UK manufacturing industry:

"This report regurgitates information we have been reporting for a few years. The move to European principal companies, whether in Switzerland, Ireland or the Netherlands, due to differentials in corporation tax rates has resulted in senior management, and therefore power, being moved from the UK to other parts of Europe. With both brain power and financial power moving overseas, this trend is ultimately bad news for the UK and is one of the reasons why the Irish are so protective of their corporation tax rates even as the bailout occurs. The advantage that served the UK so well post-war – namely its close relationship with the US – is dying. Once businesses move away, they won’t come back.

"The UK has a very flexible liberal economy and while this encourages investment in the good times, it also allows companies to downsize all too easily in the bad. The SME manufacturing market, however, remains strong and its links to research in universities and flexible lean advance engineering remain the UK’s best hope. It is also important for the UK to encourage the BRIC economies to see the UK as innovative and ahead of the game by encouraging investment in innovation through long-term partnerships.

"The UK government also needs to focus on its R&D credits developing regional clusters like advanced engineering, nuclear, bio automotive and food and more linkage between university research and industry in its forthcoming Manufacturing White Paper in December.

"It isn’t too late to help UK manufacturing but we need to recognise that the UK’s role in the global economy should focus on bespoke Manufacturing Excellence rather than commodisation or standardisation in the 21st century."

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