March of the makers

Financial services' share of GDP rose from 6% in 1997 to 8% in 2007, while manufacturing's share nearly halved over the same period, from over 20% to 12½%, it reveals. But "the rebalancing of the economy appears to be underway", it offers, highlighting that manufacturing output continuing to expand rapidly, while in 2010 manufacturing output grew by 3.6%, its fastest rate since 1994. And Chancellor George Osborne got into his oratorical stride in the Houses of Parliament, declaring that he wanted "a Britain held aloft by the march of the makers". On the support for investment in manufacturing technology front, the limit on the capital allowances for short life assets will be extended from four to eight years. This looks like it will apply to machine tools, but only if they are disposed of after eight years, according to the FT. In addition, the Government said it will look at the scope for introducing enhanced capital allowances to support zones in assisted areas where there is a strong focus on high value manufacturing. But it is the focus on innovation and R&D where the meat really is. In the accompanying 'Plan for Growth' publication, it is highlighted that just over 40% of UK manufacturing firms are involved in technological innovation, lower than Germany (70%), Sweden (over 50%) and in Finland (50%). So, the first of a series of new Technology Innovation Centres (TICs) will support high value manufacturing. TICs are modelled on Germany's Fraunhofer establishments and will help make new technologies investment-ready and better able to attract financing, it is said. There are also to be nine new centres for innovative manufacturing (CIMs), to be set up by 2012, and which will feed new ideas and discoveries through to businesses and the new TICs. In addition to this, there's to be an increase in the SME rate of R&D tax credit to 200% from April 2011, and to 225% from April 2012, subject to State aid approval (R&D tax credits are available to a wider pool of manufacturers than might be thought, incidentally – see http://bit.ly/f5SINy). So when Mr Osborne talks of his 'march of the makers', he is clearly thinking about an effort that is suported by new and innovative products originated and made here in the UK. It may take a few years to build a pipeline of these, of course, and the 'march' is, therefore, likely to remain hidden from public view for a while. But since between 2010 and 2015 both private and government consumption will fall as a share of GDP – by about 1.8% and almost 4% respectively, with investment and exports predicted to grow on the same basis by almost 3% and almost 2.5% respectively – it is clearly the 'march of the makers' that is calculated to deliver what little growth there is set to be in the UK economy. First published in April 2011