Plastics Industry Meets Bank of England (27th Jan 09)

On January 27th the British Plastics Federation’s (BPF) ruling body met with Bank of England officials to discuss how the state of the economy is affecting the strategically important £18 billion turnover UK Plastics Industry.

The BPF was armed with the results of its latest Business Conditions survey.

Key Findings of Survey

• 69% of respondents said UK sales turnover would decrease by 10% this year.  Much higher decreases are expected from those supplying the Automotive and Housing sectors
• Only 27% expected Export sales to increase by about 7% on average and 32% expected an average 8% decrease
• 56% will reduce their staffing this year by an average of 9%. Much higher reductions are expected in sectors supplying the Automotive and Housing sectors.
• Taking the 56% intending to reduce staff as the average, this indicates that the UK Plastics Industry will probably shed 9,300 jobs this year.
• Obtaining credit from Banks was a problem for 29%. High Charges and difficult lending criteria were a problem for 42%
• 48% had problems obtaining Credit Insurance. Respondents spoke of market sectors being downgraded, higher premiums and difficult negotiations.
• 54% of respondents will give no pay increases this year. 27% will increase pay by 2-3%. Some firms have implemented short time working, for example 4 day weeks.
• Asked what their top company priorities would be in 2009, respondents said in order: mitigating the Recession’s impact; finding new business; greater manufacturing and energy efficiency; seeking export business.

Plastics industry leaders took further evidence drawn from their own corporate experience to the meeting.

Peter Davis Director General of the BPF said, “The survey results clearly show the recession is having effects on our industry.  High bank charges and getting credit insurance are particular problems.” 

Strategic Importance of UK Plastics Industry

“Policy makers should be aware of the strategic importance of the UK plastics industry. It underpins the efficiency and competitiveness of ‘high tech’ user industries which range from packaging, construction, healthcare automotive and aerospace. Plastics provide innovation; lightweighting; durability; energy and cost savings. This makes a crucial contribution to a balanced economy and a progressive manufacturing sector” said Davis. 

 Proposals to Government

The BPF’s Recession Action Group of senior members, chaired by President Calum Forsyth of Wavin Plastics, has developed a series of proposals it is recommending to the Government to help mitigate some of the specific effects of the Recession. 

Credit

• Introduce a national scheme to guarantee credit insurance to companies of all sizes 

Housing market stimulus

• Commit to Crosby by Government guaranteeing £100bn of mortgage backed securities in 2009-10
• Reduce VAT to 5% on all Housing energy efficient products
• Government speed up its programmes for sociable, affordable housing 

Local Taxes on Business

• 12 month freeze on Business Rates
• Do not give local authorities the power to levy supplementary business rates.  This proposal is currently going through Parliament and if agreed would come into effect in April 2010 

Reducing Taxation

• Scrap April increases in V.E.D. and fuel duty to help new car sales. We have the highest Fuel Duty in Western Europe
• Scrap the Climate Change Levy increase in April
• Suspend the introduction of the Carbon Reduction Commitment
• Suspend empty property rates for all companies
• Reduce the headline rate of Corporation Tax to a more competitive level and reduce its complexity. The increase in small company Corporation Tax should be reversed permanently back to 20%
• Scrap the increase in employee and employer National Insurance Contributions in April 2011 planned by Government. 

Employment

• We support 3 month internships for graduates
• More flexible and generous short time working allowances
• The Minimum wage only to be increased by the rate of inflation
• Scrap full employment rights for temporary Agency workers 

Public Sector economies to reduce borrowing

The BPF is concerned at the huge level of National Debt revealed by the Government: £78bn this year; £118bn for 2009-10. The Government claims it has only found £5 bn of public sector savings. The BPF believe the public sector must play its part in reducing those borrowings. The BPF has called for:

• A freeze on public sector recruitment to save 10% of its 5.8 million posts. This would exclude front line staff such as: nurses; firemen, police, the armed services.
• Substantial savings in Regional Development Authorities after an independent review of their roles, costs and value for money. 

Increase support for Exports

With sterling at a historic low this is an excellent opportunity for government to build on the £4.6 bn of exports already achieved by the plastics sector by

• UKTI  increasing grants for companies to exhibit abroad or go on missions
• UKTI  increasing grants to accredited organisations looking after UK pavilions at overseas exhibitions and trade missions 

Support for Innovation

Innovation has always been a major strength of the UK plastics industry

• Reverse the 40% funding reduction by the Technology Strategy Board for the Materials Knowledge Transfer Network 2009-10

Davis added that the British Plastics Federation has welcomed Government help such as the Enterprise Finance Guarantee and Working Capital Scheme.