By Maximilian Clarke

The UK’s manufacturing sector again avoided decline, accelerating its rate of growth during the third quarter of 2011, the Office for National Statistics’ GDP estimate shows.

Within the data, investment in manufacturing also increased despite a slowdown in across the UK’s chief trading partners. Manufacturing remains central to the UK, who are currently the world’s 6th biggest manufacturing nation in terms of value.

In order to protect the crucial sector, the UK’s biggest manufacturing organisation, EEF, have outlined a series of recommendations for the chancellor

“The overall economy continues to grow but the more encouraging signs lie in the underlying detail. Manufacturing investment increased significantly which is crucial if the sector is to fulfil its potential to provide the much needed rebalancing of the economy,” said Lee Hopley, EEF’s chief economist.

“However, there’s still a lot of catching up to return to pre-recession levels of investment and, with the external outlook feeding greater caution and forthcoming changes to the tax treatment of capital investment, the tide could turn in 2012.

“The Autumn Statement can help to ensure we deliver on the fiscal mandate by supporting growth and investment. But these measures will need to be within the existing fiscal envelope.”

EEF’s recommendations for the Autumn Statement are:

- The introduction of 100% first year capital allowances for a time limited period of two years.

- Reform of the R&D Tax credit to make it more effective at boosting investment and creating high value jobs.

- Availability of finance at the right cost and terms and conditions remains a challenge for many SMEs. The government’s credit easing package must not only address the structural problems in the UK’s financial sector, but demonstrate that government will pull all the levers available to get credit to small businesses in the short term. The Business Growth Fund should be extended for companies between £5m and £50m to cover debt as well as equity.

- A compensation package which effectively targets those energy-intensive industries most affected by its climate change policies.

- The announcement of a refocused Growth Review with the aim of systemically dismantling the biggest barriers faced by business. For manufacturers the biggest priorities for growth as bringing the burden of taxes and regulation down; making it easier for companies to find the finance and skills they need to grow their businesses. This should be for the lifetime of this Parliament to 2015.

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