EEF Chief Executive believes “Manufacturing can be part of the solution” as industry calls for budget boost to tackle productivity gap

On the back of new research in a report ‘Piecing together the Puzzle – Getting UK manufacturing productivity growth back on trend’, EEF, the manufacturers’ organisation is calling for a major boost to investment in the forthcoming budget.

The research highlights capital investment, use of labour, company size, source of revenues and management practices as the key factors which help explain the growing gap over the past decade.

Foreign owned firms are twice as productive as UK owned firms, according to EEF’s research and score 40 per cent higher than domestic companies in the ONS Management and Expectations Survey 2016.

Additionally, foreign owned companies also invest almost €9k (approximately £7.9k) per employee more than domestic firms, with the UK being the only major country in Europe where the gap between foreign owned and domestic run companies is growing.

The research comes on the back of separate EEF data showing one third of companies cited political uncertainty as the main reason for not increasing investment.

This compares to a quarter after the EU referendum in 2016.

Two thirds of companies are planning to hold off increasing investment in the next two years with a third planning to do more, the lowest figure EEF has recorded on this data point in five years.

To help fix the investment and productivity gap, EEF is calling for the introduction of numerous measures including accelerated depreciation over the Annual Investment Allowance (AIA) threshold, the re-introduction of the Regional Growth Fund and a new mechanism which links investment in Apprentices to management training.

Stephen Phipson, EEF Chief Executive, said: “The UK’s recent productivity record, if it continues, will bear down on growth and improvements in living standards. Manufacturing can be part of the solution, but the factors contributing to the problem – company choices about investment and management capability, in particular – have been some time in the making and won’t be tackled with a silver bullet.”