Manufacturing: the prospects and the promises

04 October 2011

According to the latest Markit/CIPS UK Manufacturing PMI, published last week, manufacturing production unexpectedly rose in September, though a large part of the increase in output was apparently only achieved through the fastest depletion of backlogs of work for two years. New export business moved in the opposite direction, contracting at the quickest pace since May 2009 as demand fell throughout the UK's key global markets.

Reported in the same survey, September saw manufacturing employment fall for the third successive month, with job losses being linked to company restructuring, non-replacement of leavers and the ongoing subdued underlying trend in new orders. In the same week, and more from a recruiter's viewpoint, the Reed Job Index saw manufacturing jobs up 4 percent month on month, and up 32 percent year on year, during September. This is in contrast to the national job demand trends, which Reed says have slipped down month on month.

Rob Dobson, senior economist at Markit and author of the Markit/CIPS Manufacturing PMI says the modest return to growth of UK manufacturing output in September is a positive, but it is hard to escape the fact that the sector’s performance has weakened substantially since the opening quarter’s growth surge. Chartered Institute of Purchasing & Supply (CIPS) chief executive, David Noble believes the UK manufacturing figures offer some cause for relief after the 26 month low seen in August, but we're a long way off from celebration. And with employment continuing to fall this all adds to a subdued mood.

A more upbeat Martin Warnes, managing director of reed.co.uk, says September’s Reed Manufacturing Job Index figures may indicate that some rebalancing of the economy is underway towards the UK’s technical and industrial areas, at a time when job demand in the financial sectors is slipping back. “Employers are confident enough to invest in the recruitment of new manufacturing staff, which is a leading indicator of potential future growth across the whole UK manufacturing sector,” he said.

Employment prospects aside, employment law came under the spotlight last week as Chancellor George Osborne delivered his speech to the Conservative Party Conference. He pledged to make it much less risky for businesses to hire people, doubling to two years the amount of time that someone can be employed before the risk of an unfair dismissal claim (this is due to come into force on April 6 2012). He also revealed that the government was going to introduce a fee for taking a case to a tribunal that litigants only get back if they win.

According to the Workplace Law Network website, while Mr Osborne did not specify amounts in his speech, it is understood that workers will face a £150 to £250 charge to make any employment tribunal application and a further £1,000 for starting a hearing. The government hopes these proposals, which predictably brought conflicting reactions from across the employer/employee divide, will see the number of unfair dismissal claims drop by around 2,000 a year.

Institute of Directors director-general, Simon Walker warmed to the announcement, hailing the Chancellor’s announcement as a vital step to ending the ‘no win, no fee’ employment law culture that, in Mr Walker’s words, has frightened so many businesses into recruitment inertia. Mr Walker also welcomed the extension of the qualifying period for unfair dismissal claims from one to two years. “Both these measures are good for employment prospects,” he said. “If employers can’t fire then they won’t hire. But there are many more laws that increase the cost and risk of employing people, and these also need to be looked at.”

CBI director-general, John Cridland also welcomed the announcement, saying the Chancellor’s proposals would help job creation. “Small firms are sometimes put off taking on an extra employee because of the fear of ending up in front of an employment tribunal,” he said. “Doubling the period for unfair dismissal rights and introducing a tribunal fee to prevent vexatious claims will give firms more confidence to hire.”

TUC general secretary Brendan Barber was unimpressed and in responding, didn’t mince his words. “At a time when the UK economy is stagnating, all we heard were cheap lines for right-wing activists, a re-hash of old policy announcements and help for bad bosses to mistreat and sack staff on the cheap,” he warned. “The Chancellor is not listening to the growing calls for a plan B - and we are all playing the price.”

You can have your say about employment law for the next three weeks as the government’s interactive online Red Tape Challenge focuses on more than 160 different cross-government employment related regulations that businesses have to deal with in all areas of the workplace.

The campaign asks for a variety of suggestions about how regulations can be improved, simplified or even abolished, whilst also ensuring that the current standard of employment rights for employees are maintained. Examples of regulations on which your views are sought include the rules on collective redundancies, employment agencies, immigration checks, the National Minimum Wage and statutory sick pay. The aim is to make sure they are fit for purpose and easier for businesses to understand. Click here for more information.

Les Hunt
Editor