UK losing shine as competitive base for manufacturers - survey

LONDON (Reuters) - Britain is becoming less competitive as a base for manufacturers, according to a group representing the factory sector which warned the government against laying further costs on firms which make cars, chemicals and other goods in the UK.

Workers inspect components on the fuel inlet production facility at Futaba Industrial in Foston, central England January 21, 2014. REUTERS/Darren Staples

EEF, which represents 5,000 firms engaged in manufacturing, engineering and technology, said 56 percent of respondents in a survey it commissioned viewed Britain as a competitive location for making goods, down from last year’s 70 percent level.

Britain’s economy has grown faster than those of most other rich countries over the past two years. But growth has been driven by the services sector and manufacturing has fallen short of the government’s hopes for an export-led recovery.

“This is a wake-up-call and I would urge the government to continue to work proactively with industry to mitigate risks and boost opportunities for our sector,” EEF’s chief executive Terry Scuoler said.

EEF chief economist Lee Hopley said the survey reflected growing concerns about rising labour costs and regulations.

“It is really important that businesses have a lot of confidence that we are focussed on forging ahead with a competitive manufacturing base in this country,” she said.

Last month, the CBI, an employers group, said politicians risked intervening too much in the job market after Chancellor George Osborne announced a new, higher minimum wage and a new levy to fund apprenticeships.

Of the 286 executives who responded to the EEF survey, which was conducted in November, 36 percent saw upwards pressure on business costs as a possible risk to growth this year.

Just under half the manufacturers polled saw more risks than opportunities in the year ahead. Big movements in exchange rates were cited as a risk by 42 percent of manufacturers, reflecting concern about the appreciation of sterling in recent years.

That was followed by potential economic volatility in a major market for British exporters and uncertainty over Britain’s membership of the European Union, which were both cited by 36 percent of respondents.

Prime Minister David Cameron has pledged to reshape Britain’s ties with the EU before holding an in-out membership referendum by the end of 2017, with the vote possibly taking place some time this year.

Reporting by Sarah Young; editing by William Schomberg