Prophets forecast 1998

Industry experts tell us what they think is needed to provide a happier and more prosperous new year for British manufacturing industry

Gordon Brown’s tax proposals add to the risk of a profits and cash squeeze

The big issue for manufacturing this year is the high value of sterling. In the short term this will continue to impact upon exports and there is the added twist of the present difficulties in Asia, which may also boost imports into Britain.

There are likely to be continued problems on margins for manufacturers, with upward pressure on costs being fuelled by pockets of skills shortages, especially in IT in the run-up to the millennium.

Looking further ahead, there is a potential adverse impact on cashflow from the proposed changes to corporation tax announced by chancellor of the exchequer Gordon Brown in his pre-Budget statement last year.

This adds up to the risk of a profits and cash squeeze on manufacturers and declining employment, adjustments in investment plans and stalled growth.

Kate Barker, chief economist, Confederation of British Industry

Our agenda will include a national marketing campaign to promote the profession

Significant changes to the engineering profession over the past two years have ensured it will be better placed to contribute fully to the debate on national issues in 1998.

We recognise that we cannot achieve our objectives by working in isolation. But just as the professional institutions and the Engineering Council have created an effective partnership to promote and regulate the profession, the time is ripe to broaden this strategy to forge closer links with the wider engineering community. Initiatives are under way.

Our agenda will include a national marketing campaign to promote the profession and refinement of standards for education and training of engineers and registering levels of professional competence.

We also wish to cement better relationships with industry. Stronger bonds will encourage and enable the engineering community to campaign collaboratively on national issues of common concern. We have been able to establish strong positions on transport, energy, telecoms and the environment. Our views now need to be put across.

Finally, a united front to Government, through direct representation or in response to consultative documents, will enable our community to have more influence on fundamental issues such as education policy.

Mike Heath, director general, Engineering Council

Manufacturers are experiencing tighter squeezes on margins to maintain market share

Taking a global view of the machine tool industry in 1998, I think that there will be many pressures placed on UK manufacturers due to the strength of the pound against main trading partners and the high interest rates that have been instigated to keep down inflation.

Manufacturers are experiencing tighter squeezes on margins, and are seeking further cost reductions to maintain market share and increase in new markets.

But this should not be taken as a completely negative picture. The US market should remain strong in 1998, and this outlook should be echoed in Europe, where the economy is recovering.

Indeed, Germany and the Central European markets will certainly be areas where significant gains could be made in 1998.

Major concerns lie particularly with the Asean area, where the recent collapse due to currency problems and over-capacity in the automotive sector is expected to create slow movements in the economy in 1998, with recovery expected in later years. China is not forecast to show major growth during 1998.

For everyone in the machine tool business, 1998 will be a very challenging year in the face of continued strong competition.

John Bloxham, managing director, Cincinnati Milacron UK

We are concerned that engineering is bearing the brunt of macho economic policy

The major concern for the engineering industry is the continuing strength of the pound which is beginning to have serious effects on our hard won export markets. We are concerned that the Government is attempting to run economic policy in too macho a manner and engineering is bearing the brunt of this. Because of its immediacy a lower pound would be my first wish for 1998.

Looking further ahead I should also like to see more clarity from the Government on its position with regard to European Monetary Union. While we welcome the chancellor’s recent statement setting out the Government’s position, we still feel that he should give an approximate date to which business could plan for entry. We would urge the chancellor to set out an active convergence programme to prepare the way for entry.

For too long, science and engineering have had second tier status. I would like to see more support for both, and a general raising of the profile and image of industry. The achievements of British engineering are among the best in the world and I would like it to be given the appreciation it deserves.

Graham Mackenzie, director-general, Engineering Employers Federation

Many systems have to be 2000 compliant by the end of 1998

Although there has been substantial progress in the UK towards solving the 2000 computer problem, I fear that it may be less than is necessary to complete the job on time.

When people look around and see the huge amount that is being done today compared with the state of things a year ago, they find that hard to believe. Their problem is common: a difficulty in grasping the vast scale of the problem and speed at which the remaining time is disappearing.

Probably about 20% of large businesses and 10% of smaller businesses are making adequate progress. That means that thousands of companies are doing a lot of work, hence the perception that matters are well in hand.

But it hides the key fact that 100% of companies have to get on with it. So even more thousands are doing little or nothing. Many people fail to understand how little time is left: many systems have to be ready by the end of 1998. A medium-sized business that has not started will find it hard to make it in time. Too many are in that position.

The critical challenge for early 1998 is to get thousands of businesses moving. For many, there are literally only a few weeks left to make a start. It will not be easy: 1998 is going to be a bumpy ride.

Robin Guenier, executive director, Taskforce 2000

Interest on late payment may prove fruitless

This year two of the Government’s manifesto commitments which affect small firms will become law the national minimum wage, and interest on late payment.

By May, the Low Pay Commission will recommend a minimum wage level. Small firms should not despair if a uniform figure is set, it would have to be fairly low to take account of sectoral and regional variations.

The FSB believes interest on late payment may prove fruitless because large firms influence payment terms.

Stephen Alambritis, head of parliamentary affairs, Federation of Small Businesses

More companies will need to adopt an enlightened attitu

I hope the vision of a Learning Society, outlined in the Dearing Committee report, becomes a reality. That will need collaboration between higher and further education institutions with industry and commerce. This will require a willingness by educators to develop new approaches to course provision and more companies will need to adopt an enlightened attitude towards the benefits of lifelong learning.

Second, I hope educators may reflect on the positive aspects of the Sartor proposals rather than dismiss them as unworkable.

Professor Cliff Burrows, Hebron and Medlock dean of engineering and design, University of Bath