Graeme Craig, Senior Industrial Issues Executive at the British Plastics Federation, provides an overview of the recent benchmarking survey for the BPF Moulders & Specialist Processors and the Rotational Moulding group while commenting on the government’s Industrial Strategy.
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“There is no magic money tree.” - Amber Rudd, 31 May 2017.
Do you remember this? Ms Rudd was standing in for the then Prime Minister, Theresa May, in the second television debate for her ill-advised snap general election. At the time, the then Home Secretary was pointing the finger at the PM’s opponent, Jeremy Corbyn, whose apparently unfunded spending promises were a mere fantasy.
The PM clearly loved the term and used it when speaking to a nurse who complained they hadn’t had a pay rise for eight years, saying, “There isn’t a magic money tree that we can shake that suddenly provides for everything that people want.”
While popular at the time, the magic money tree jibe, like Jeremy Corbyn, subsequently receded into the background. The interim period has seen several sound bites jockeying for position with the headline writers, mainly around stopping boats and smashing gangs. The idea being that if we’re all looking at the English Channel, we can’t see an economic crisis sneaking up behind us.
The language changed following last year’s general election, allowing us an opportunity to refocus. On 25 August 2024, Keir Starmer made it clear that his government had inherited a “£22bn black hole” and the country would have to “accept short-term pain for long-term good.” There has been much debate about the size of this black hole, but there’s no doubt that HM Treasury has a cash flow problem. Perhaps the real debate is whether the short-term pain is, in fact, short-term.
So, what can a new government do when it finds itself in such a hole? One of Keir Starmer’s predecessors had a suggestion:
“Growth, growth and growth” - Liz Truss, 5 October 2022.
To be fair to Ms Truss, each one of her successors agreed. So how did the new Labour government begin to nurture that growth? In her first budget as Chancellor of the Exchequer, Rachel Reeves announced a £40bn package of tax increases, immediately breaking one promise and keeping another: one on tax and the other on pain.
Pain has included a £25bn increase in National Insurance Contributions (NICs), a lowered threshold for NICs, changes to taxation on benefits-in-kind, substantial increases in the National Living Wage and the Extended Producer Responsibility, to name a few.
Is the UK industry, more specifically the plastics industry, being shaken like a magic money tree?
You could argue that the government’s new Industrial Strategy, promising to take a “new economic approach to backing the UK’s strengths, with ambitious plans for 8 high-growth sectors,” is a step in the right direction. While many manufacturing companies have benefited from previous industrial strategies, they’ve mostly been OEMs. A boost for the OEMs will permeate throughout their value chains, but this hasn’t led to investment. The share of UK GDP dedicated to business investment has been trending downwards since the early 1960s and is the lowest of the G7 nations, as reported by the Institute for Government Analysis of ONS figures.
We’ve seen evidence of this contraction at the BPF. When I visit our members, they don’t talk about growth, but pain. Our Business Conditions Survey in June showed that sales expectations have weakened compared to June 2024. Previously, 75% of firms expected an increase; now, only 46% anticipate growth. We’ve also seen investment plans decrease from 28% to 20% in six months.
To support our members, we host weekly meetings with the Department of Business and Trade (DBT), one-on-one meetings with ministers and the annual Parliamentary Reception. This year, we’ll have a second Parliamentary Reception in November, where we’ll be presenting our key messages to the Scottish Government in Edinburgh. Besides offering market intelligence, free legal and technical advice and productivity guides, we also provide the Climate Change Agreement (CCA). This helps plastics processors secure significant savings on Climate Change Levy (CCL) charges in return for meeting energy efficiency targets.
You could argue that all our support might as well disappear into a black hole with lower demand, geopolitical upheavals every week, and our national government in crisis almost every day.
In our Key Policy Requests Document, we set out three priorities requiring government attention:
- Recognise the plastics industry as a ‘Foundation Industry’
- Improve the management of used plastic to achieve circularity
- Develop medium to long-term competitiveness
While this may seem purely plastics specific (and so it should), our regular meetings with DBT provide an opportunity to relate and restate the anecdotal evidence gathered on my many site visits to member factories. This, along with the data from our benchmarking surveys and business conditions reports, paints a picture of an industry that is unsatisfied with our new government.
Almost a year after the general election, I conducted my annual benchmarking surveys for the BPF Moulders & Specialist Processors and the Rotational Moulding groups. This year’s topical question was: Do you feel the new government is supportive of the manufacturing industry? This was the only occasion where we received a unanimous response, and it wasn’t good. With a fresh package of tax hikes widely predicted in the Chancellor’s autumn statement, we could be seeing the magic money tree (yes, you) being shaken again.
The BPF, together with other manufacturing organisations, has been part of a coordinated budget submission to HM Treasury to ensure a harmonised response. Should UK business and industry be targeted again, the short-term pain that was promised could turn out to be agonisingly long.