Hopes that manufacturers can drive Britain’s recovery have been dealt a serious blow after Ratan Tata, head of the UK’s biggest industrial group, said a stagnating economy, struggling supply chains and high energy costs are damaging the country’s competitiveness. “We are saddled with a high cost of energy and different costs that our counterparts in Europe may not be subjected to, and certainly in Asia we would not be subjected to.”
Mr Tata’s warning, issue in an exclusive interview with The Daily Telegraph, represents a sobering assessment of the economy as George Osborne prepares to announce a series of measures in the Autumn Statement designed to kickstart growth.
“The economic situation, the high cost of undertaking manufacturing, the supply chain – which is dying out as manufacturing undergoes hardship – make the UK not the first place you would look at to make a manufacturing investment,” the Indian business leader said.
Tata Sons is one of the leading investors in UK manufacturing and the country’s largest industrial employer through its ownership of Jaguar Land Rover, Tata Steel, formerly known as Corus, and Tetley Tea.
The comments from Mr Tata come as the challenges facing Mr Osborne were further highlighted on Tuesday as Britain’s building firms reported their weakest outlook since the depths of the recession.
Activity in the construction industry in November shrank for the third time in four months, jobs were axed at the fastest pace in two years, new orders collapsed at their sharpest rate in three-and-a-half years, and sentiment in the industry hit its lowest point since December 2008, according to the CIPS/Markit Purchasing Managers Index (PMI).
In the Autumn Statement, Mr Osborne is expected to break his golden rules on the public finances due to the moribund state of the economy. He will also have to borrow around £80bn more than planned over the next five years as the economy recovers more slowly than had been forecast in March.
Construction accounts for just 6.8pc of UK national output but has been one of the main drags on growth since the crisis.
To combat the decline, Downing Street has put infrastructure investment at the centre of its recovery strategy with plans to shift £5bn of spending from Whitehall departments into the schools budget, as well as revamping the private finance initiative to harness investors’ funds and unveiling an energy strategy that will see as many as 30 new gas stations built.
Against that backdrop, Mr Osborne will be hoping that Tata continues to invest in the UK. So far the group has ploughed more than £16bn into UK manufacturing and employs over 50,000 people.
Despite his warning, Mr Tata said he remained committed to the UK and praised the “talent and capability” of the country’s workers. “It will not be our intention to cut back in the UK or close down anything if we can help it, but to grow as much as we can in the UK and also in other parts of the world,” he said.
However, Mr Tata said that “someone has to wave the Union Jack in the area of manufacturing” in order for Britain to expand its industrial base.
“There has to be a drive to make the UK competitive in the motorcar industry or in the engineering industry,” he added. “To do that you have to give attention to the manufacturing sector. We are saddled with a high cost of energy and different costs that our counterparts in Europe may not be subjected to, and certainly in Asia we would not be subjected to.