Mixed blessings from Downing Street now that CE marking looks here to stay but R&D spend takes a hit.
It’s not so many years ago that the Conservatives had an open field when it came to presenting themselves as the party of industry. Since then, to stretch the sporting analogy further, that reputation has taken more than one strike, thanks to a succession of own goals.
Granted, it didn’t help that Brexit created a fault line with the dominant trend in business on one side and the dominant trend among the Tories on the other. The relationship perhaps reached its nadir with one premier’s oft-attributed and none too convincingly denied “f*** business” retort.
So, while it may not win him a General Election, PM Rishi Sunak will likely garner plaudits for posterity for doing something to repair the fractured interaction. Just look how much John Major’s stock rises with every successive year.
Some might find irony in the fact that, of the last three premiers, only the ‘true believer in Brexit’ has achieved the tone needed to convince industrialists that the Government might be capable of understanding them and speaking their language. Perhaps a Brexiteer by conviction and a businessman by background finds it easier to acknowledge the inconsistency of an EU exit that creates rather than diminishes red tape than might recent converts with something to prove.
Thus, a tranche of the planned bonfire of Brussels laws escaped the flames, with businesses nodding general approval in the knowledge that their time will not be spent complying with UK-specific regulations that all but mirror EU legislation.
Few of these exclusions will be as impactful or as popular though as the retention of the CE mark – a symbol as close to manufacturers’ hearts as the imperial system of weights and measures is to a Tory backbencher.
Strictly, of course, the CE is not an actual certification mark. As its full name ‘Conformité Européenne’ makes clear, it is the manufacturer or importer’s statement that they have complied with European standards on health, safety and environment, a useful hostage to legality. And its commercial value is that it is a standard requirement for imports into the large continental market covered by the European Economic Area: the 27 European Union states plus the three European Free Trade Association members.
The CE mark has long been a target for replacement in post-Brexit Britain by the proposed UK Conformity Assessed or UKCA mark. Not a popular move with manufacturers exporting to Europe, who faced completing a double set of forms to please both Brussels and Westminster.
There were early indications of cold feet in Whitehall as the deadline for transition was shunted successively further back, before the recent decision to announce that use of the CE mark was to be extended “indefinitely”.
Process firms have read between the lines. As technical director of Lancashire weighing and metering specialist Rospen Industries, Grant McGeever put it: “The CE mark is here to sta y, which is great news for manufacturers. The move to a compulsory UKCA mark would have increased time and costs for manufacturers at a time when the industry is already facing pressure.”
It didn’t help that Brexit created a fault line with the dominant trend in business on one side and the dominant trend among the Tories on the other
Wayne Rose, director and CEO of the British Pump Manufacturers’ Association (BPMA) which has lobbied hard for retention, also applauds the business department announcement but rues the cost for members to date: “Some of our larger members have already endured the unwelcomed expense and bureaucracy of dual safety mark adoption, simply to continue selling the same products to the same markets, so although they too will welcome this announcement, a good deal of wasted time, effort and cost has already been spent,” complains Rose.
That said, Sunak’s name remains on the decision to recommit to the CE, even if he’s been smart enough to placate the backbenches by implying it’s a postponement. He may need to flag the concession hard to industry, though, to offset the latest intervention in the area of R&D incentives. Those changes spell a potential administrative burden for claimants.
From August this year, those claiming on either of the two Government schemes, the Research and Development Expenditure Credit (RDEC) and the small and medium enterprises (SME) R&D relief schemes, need to include an extr a form disclosing the level of financial expertise provided for their application.
It’s a laudable attempt by Chancellor Jeremy Hunt and the former Chancellor, now PM, to tackle the burgeoning level of faulty or crooked applications – recently revealed to be far higher than originally supposed – but in straitened times unlikely to be welcomed by many.
There’s worse to come. The Exchequer – not unreasonably – plans to streamline R&D tax relief with one scheme to reduce its own administration burdens. However, applying the cost rules for the SME scheme to larger firms formerly using the RDEC creates a serious deterrent, advises Ayming partner of Innovation Incentives Mark Smith: “The Government plans to merge the two R&D schemes, expanding the cost rules of the SME scheme to apply to businesses of all sizes. The new rules will prevent claims for subcontracted R&D, meaning the companies that are doing the R&D won’t be eligible to receive the funding for it,” he says.
Taxpayers won’t condemn the Treasury for promoting efficiency but it’s a moot point whether R&D relief is functioning effectively for end users. Claims experts RDS highlighted statistics that suggest the number of food companies applying appears unusually low, accounting for just 0.4% of the claims in one category. Given the PM’s vocal support for R&D as a seedbed for industrial growth, it might merit further attention. And while it may not secure five more years in office, it could start to repair one old alliance.