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EAMA - Engineering & Machinery Alliance Press Release

6 December 2005

 

Mechanical engineers’ report points way to cut cost of regulation

 

The UK’s 13,000 mechanical engineering companies may be spending £430+ million a year on red tape associated with employment, environmental reporting, health and safety and statistics according to the Engineering and Machinery Alliance (EAMA) in a report to the Cabinet Office, the Department of Trade and Industry and The Chancellor of the Exchequer.

EAMA produced the report in response to the Chancellor’s challenge earlier in the summer inviting business to say where and how regulations could be simplified or stop complaining about red-tape.

EAMA says that on average each company is spending over £33,000 a year on red-tape and that there are ways to reduce this hefty chunk spent out of average sector company sales of £2.5 million. Firms in the report say they believe that Government can begin to turn this situation around if it uses companies’ practical expertise when drafting new regulations jointly with business (38%), simplifying the forms it sends out (22%) and cutting down the number of regulators (19%).

For example, when it considers extending family friendly policies Government should also look at engineering SMEs’ requirements for skilled workers to stand in for the absent mother or father. By working with the sector, EAMA says the Government could develop retiree tax incentives to foster a pool of skilled, trained personnel able and interested in taking on short-term work contracts (e.g. as parental leave cover). EAMA recommends that this pool should be registered on a Government accredited website with previous employer’s references made available.

EAMA chairman Graham Hayes points out: “We believe that this approach could work well and if tackled in the right way might support two other Government objectives: to offer people of pensionable age opportunities to extend their earnings; and to develop and maintain pools of skills across the economy and the regions. We are trying to help reduce wasteful red-tape by putting forward a number of constructive suggestions. The Government’s declared action on ‘ambulance chasers’ for example is welcome. The need for it is clearly borne out by the findings in our report. But we all need to make sure that action follows.”

The report offers a number of solutions to other problems but points out that employment red tape and the costs associated with it are the number one concern by far. They account for 80% of the costs. The report says that employment regulations are now so complex that they are a positive disincentive for SMEs to take on new employees and pensions requirements have added approximately a quarter to these costs.

To help equip the unemployed with skills that are need in the workplace, EAMA’s report recommends providing a simple training credit against NI or similar while a person acquires the skills an engineering SME can really use. An unproductive unskilled person is ‘too expensive’ to take on and pay the minimum wage while they are going through the 6-12 months training needed.

On pensions, EAMA would like to see the regulator’s requirements simplified. The onus on trustees is now such that SMEs running schemes have difficulty recruiting employee representatives to serve.

To cut bureaucracy and tax compliance costs for both business and Government the report suggests merging PAYE and National Insurance. They are clearly both payroll taxes. A joint business-Government simplification project could cut implementation costs and as a by-product show that the UK is intent on maintaining its position as the ‘best place to do business in.’

In the environment and statistics areas, firms have identified procedures that cost the sector many millions of pounds and yet make no contribution to a better environment or Government policy or sectoral understanding.

Graham Hayes: “UK firms are not anti-regulation per se. They see that regulations are needed and that they can be positive when they are clear and well targeted. But woolly, poorly conceived regulations that palpably have no direct impact on the ills that they are meant to address, give regulation and those associated with them a bad name. We should all want to do something about that.”

(ends)

Notes to Editors:

  1. EAMA’s seven member associations are: British Automation and Robot Association (BARA), British Paper Machinery Suppliers Association (BPMSA), British Turned Part Manufacturers Association (BTMA), Gauge and Toolmakers Association (GTMA), Manufacturing Technologies Association (MTA), Printing, Papermaking and Converting Suppliers Association (PICON), Processing and Packaging Machinery Association (PPMA)
  2. Graham Hayes (photo available on request) was elected EAMA chairman in 2004. He is chairman of Bradman Lake the British Packaging machinery manufacturers.
  3. According to the Office for National Statistics UK mechanical engineering comprises:
    • 13,000 firms
    • £32 billion in sales
    • 304,000 employees

    That makes an average per firm of:
    • £2.5 million in sales
    • 23 employees

    In total, these firms
    • Spend £8 billion on employment
    • Create £12 billion in added value
    • Export £24 billion
    • Run a positive trade balance of £4 billion