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Failure by UK businesses to keep pace with US and European levels of industrial investment is having a “detrimental impact” claims trade body.

In a new report – Industrial Strategy: A manufacturing ambition – Make UK, the manufacturers’ organisation, claims the UK’s manufacturing sector is now at a “critical juncture,” after both America and Europe implemented policies which threaten to leave the UK behind.

It argues the US Inflation Reduction Act (IRA) – which was signed last year in response to soaring costs – and the European Union’s Green Deal Industrial Plan are having a “significant detrimental impact on UK investment” and risk “squeezing” UK capabilities.

It said: “A lack of a proper, planned, industrial strategy is the UK’s Achilles’ heel. Every other major economy, from Germany, to China, to the US, has a long-term national manufacturing plan, underlying the importance of an industrial base to the success of its wider economy.”

To support its warnings, Make UK revealed data that showed 80% of the 312 manufacturers it surveyed said they felt at an international disadvantage due to the UK’s lack of strategy.

“If we are to tackle our regional inequality, and also compete on a global stage, a national manufacturing plan is required,” the report said. “Never has the case been clearer to adopt one.”

According to the report, more than half (56%) of manufacturers said they don’t believe the government has ever had a robust vision for manufacturing in the UK. Almost three in 10 (29%) said they think a lack of industrial strategy is the “primary reason” UK manufacturing has been unable to grow in the last decade. 

Make UK is calling on the government to establish a Royal Commission on Industrial Strategy, to determine a cross-party consensus on future priorities for the manufacturing sector.

It also wants the Cabinet Office to be made responsible for ensuring the implementation of any industrial policy. 

Make UK said manufacturers are having to operate in ever-more volatile environments, meaning the need to invest more is even more pressing:

“The expectation of many manufacturers is that volatility is now becoming the new normal. In answer to this, many manufacturers are building greater resilience into their supply chains and moving from just-in-time models to just-in-case practices.”

It added: “This matters most for the UK as the manufacturers here tend to be mid-supply chain, importing materials and components, adding value, and exporting around the world. As a result, manufacturers in the UK are subject to volatility in both imports and export markets.”

The IRA is worth 1.5% of US GDP, and if the equivalent amount were to be invested in the UK the sum would total £33bn.