Manufacturers in call for cut in NI to create jobs

MANUFACTURERS need a cut in their national insurance (NI) contributions in the forthcoming emergency Budget to ward off growing challenges in the sector, industry advisers yesterday said.

The latest BDO manufacturing optimism index showed a four point fall. Picture: John Devlin

Such a move could “stimulate growth” among Scotland’s manufacturing base, which is currently experiencing a downturn, creating a projected 5,000 jobs and boosting the nation’s GDP by £202 million a year, claims the report from BDO.

The call for a reduction in NI payments comes after the latest BDO manufacturing optimism index showed a four point fall – touching its lowest level since March 2013.

The firm also called yesterday for “positive action” to support the sector from Holyrood.

The company said action was needed as manufacturing was a “vital” part of the Scottish economy, the third biggest sector north of the Border by turnover after mining, utilities and the wholesale and retail trade.

Martin Gill, head of BDO in Scotland, said the manufacturing optimism index found that the sector “was at its lowest level since March 2013 and the concern is that this is an essential part of the Scottish economic mix which needs to be nurtured and developed”.

He added: “There is an opportunity, for example, in the forthcoming Budget (on 8 July) to reduce the rate of national insurance for manufacturing to stimulate growth.” Gill said an additional concern was that the government needed to ensure Scotland was attractive to overseas investors in the industry.

He said BDO’s analysis showed that, while the 400 or so foreign-owned manufacturing enterprises in the country represented less than 5 per cent of the sector, they accounted for 55.8 per cent of turnover and just under 33 per cent of employment.

“If any of this relatively small number of firms should find a more favourable tax regime or financial incentives elsewhere either abroad or within the UK then Scotland could start to experience a real drop in GDP,” Gill said.

He added: “Manufacturing can often be ignored by policymakers, yet it is a key component of the Scottish and UK economy.

“Encouraging manufacturing growth is a vital part of maintaining and developing the wider Scottish economy and we need to ensure that it gets all the help and support that it can.”

The call to aid Scotland’s manufacturers came as it emerged yesterday that the UK’s economic growth last year looks set to be revised up to just below 3 per cent after changes to official figures from the construction sector.

Gross domestic product (GDP) in 2014 was previously thought to have risen by 2.8 per cent, but the Office for National Statistics says it is now likely to hike the figure later this month.

New data and changes to methodology mean the performance of the construction sector – nearly 7 per cent of the UK economy – has been revised upward for every quarter of last year and for the first three months of 2015.

The construction changes show that in the last three months of 2014 the sector grew 0.2 per cent, against a previous estimate that it shrank 2.2 per cent.

However, figures yesterday indicated construction fell 0.8 per cent in April, reversing an expansion of 1.4 per cent in March.

Economists said that the construction changes suggested overall economic growth at the start of 2015 was not as sluggish as previously thought and would be revised upwards.