Pressure grows for Budget boost to manufacturing

STOP PRESS UPDATE:

Leading industry figures have given  a cautious welcome to the Chancellor’s key industry initiatives with caveats regarding assistance for SMEs, clean energy transition and the coronavirus response.

Commenting overall on the Budget statement, Stephen Phipson, Make UK chief executive stated that while the impact of the coronavirus on individuals and the economy was the Chancellor’s priority he had also recognised the need to “turbocharge investment” in long term measures which will boost the productive potential of the economy and support green growth.

“For too long the UK’s infrastructure outside the South East has played second fiddle and industry will welcome the resources devoted to improving links across the UK, in particular the strategic road network,” he added.

Early responses centred on the following areas:

GREEN GROWTH

Mark Smith, innovation incentives, Ayming UK and Ireland: “The Chancellor’s decision to invest further in renewables, doubling the size of the Energy Innovation Programme is a positive step in our journey towards a net zero economy, but it leaves the industry wanting on two major accounts. Firstly, with $14.5 trillion needed by 2040 to meet global power demand, the amount of investment is relatively paltry. Secondly, it fails to account for the condition of the country’s aging infrastructure.

“In parallel with investment in renewables, we also need investment to improve our existing assets - until energy providers and the government fully understand the condition of their infrastructure, transformation will be an uphill struggle, and more outages are likely.

"To maintain the UK’s leadership position in renewable power generation and reduce our reliance on fossil fuels, we need to think about how we manage assets across the energy generation sector throughout their full lifecycle, as well as investing in net new technologies.”

R&D

James Tetley, national nead of R&D at RSM: “The Chancellor’s Budget Speech was full of references to investment in new technologies and innovation, and included some significant commitments to funding research in a range of sectors and industries, all of which can only be positive for the state of UK innovation.

"Tax credits featured too, and from 1 April 2020, companies claiming under the large company (RDEC) scheme will see an increase in the rate of relief from 12-13%. HMRC has announced that it will consult on the extension of the scope of R&D relief, to include expenditure on data and cloud computing – again a welcome announcement.”

HEALTH SURCHARGE

Tim Thomas, director of employment & skills policy, Make UK: “If the UK is to attract mobile international workers, under its future points based system it needs to be globally competitive. With visa fees, settlement fees and skills charges to pay, the hike in the health surcharge, paid annually and per head, sends the wrong message that the UK is open to the workers it needs wherever they may come from.”

SMEs

James Tetley, national head of R&D at RSM: ‘For SMEs, the anticipated reintroduction of the PAYE cap has been delayed until 1 April 2021 and - subject to further consultation - will be introduced at a level of three times the company’s total PAYE and NIC bill. This is a welcome reaction from HMRC to lobbying by the adviser community - including RSM - to ensure that the measures achieve their aim of countering abuse, without disadvantaging genuine claimants including small businesses with low payroll bills.

 ‘The big opportunity missed, was that there was no increase to the SME scheme which we would have liked to have seen. Instead, the focus was on large companies.’

ANNUAL INVESTMENT ALLOWANCE

John Rozenbroek, CFO and COO, Capify: “It’s disappointing that the government wasn’t able to provide any certainty or security around the future of AIA. An extension to the limit could have proved extremely useful to many manufacturers and could provide business owners with the opportunity to invest in much needed technology and innovation, supporting them in their future growth plans.”

EDUCATION & TRAINING

Tim Thomas, Make UK:“Extra capital funding for the entire FE college estate is both welcome and needed. With T-levels around the corner for manufacturers, funding for new capital equipment which is often a roadblock to greater technical training cannot come too soon.  The announcement of more funding for maths teachers for 16-19 year olds will generate a better equipped workforce with the STEM skills to address the skills shortage that manufacturers face.”

Earlier, Make UK's Phipson, representing thousands in the manufacturing and engineering industries, had reiterated the call for a mix of export support, tax incentives and regional development. 

A long-time critic of Brexit, the organisation insisted on the need for a relationship with the EU that eliminated tariffs, quotas and charges on UK-EU trade. But it also demanded the Chancellor addressed the technical barriers to trade by ensuring mutual recognition of product standards and regulations as well as “deep customs co-operation”.

Additional resources were needed too, said Make UK, for export promotion activities, UK trade missions overseas and for export finance guarantees must form part of our new trade policy, alongside the programme of trade agreement negotiations.

On the domestic front, Government would need to accelerate regional economic development by delivering economic devolution while offering business rates reforms to encourage investment in growth.

In practical terms, this could be done by removing some plant and machinery from business rates calculations so firms invest in boosting productivity, as well as including business rates in the Making Tax Digital programme. Government should move toward automatic application of reliefs, rather than requiring eligible firms to apply said the organisation.

Andrew England, tax partner at accountancy firm Menzies LLP, called for an increase in the rate of R&D relief that large companies can claim under the Research and Development Expenditure Credit (RDEC) scheme by one per cent from 12 to 13 per cent. The Chancellor should also take the opportunity to extend the scope of the scheme to include costs for investment in cloud computing and big data analytics. 

He warned: “Many manufacturers are already investing in AI, big data analytics and automation ... Uncertainty is holding others back however, and this could destabilise the economy unless steps are taken to incentivise investment in these critical areas. R&D relief is the obvious way to achieve this.” 

He had also cautioned against plans to revert the Annual Investment Allowance, from £1 million back to £200,000 from 1 January 2021.

“If a blanket increase in the AIA limit is considered too costly the Chancellor could select particular areas of capital expenditure, which might qualify for enhanced tax relief (say, of up to 110% of cost) – for example, investments in robotics, AI systems, data integration, 3D printers and other value-driving tech.”

Photo: TÜV SÜD National Engineering Laboratory's Advanced Multiphase Facility (AMF) is cited as an example of how greater R&D investment can boost UK manufacturing