Spring Budget - an opportunity to shine
Published: 07 March, 2017
This year’s Budget should make for interesting reading. With only a few days to wait at the time of going to press, Britain’s manufacturers are urging the Chancellor to maintain his focus on driving up productivity and pressing ahead with infrastructure investment to ensure that businesses are teed up for post-Brexit success.
I agree with the EEF, the manufacturers’ organisation, who believes the direction set by the Chancellor at the Autumn statement should continue to provide the policy framework for what will be the first of two Budgets this year. It is, additionally, an opportunity to demonstrate that the policy priorities set out in the government’s industrial strategy green paper are being taken forward by all parts of government.
Government must enable more research and innovation, skills development and higher levels of investment through the potentially uncertain Brexit negotiations. This will be critical in laying the foundations for future growth and productivity across British manufacturing.
Actions that could underpin these outcomes include a positive outcome from the government’s review of the tax treatment of R&D which has the potential to make the R&D tax credit system even more attractive compared to international partners and bring forward additional innovation investment from businesses. And with the apprenticeship levy due to hit businesses this year, further efforts and investment is needed to ensure that there is sufficient, high quality technical training provision to meet the needs of employers and learners.
In addition as Caroline Milton, partner and manufacturing sector specialist at accountancy firm, Menzies LLP highlighted to PWE recently, backed by stronger-than-expected tax receipts, the Chancellor has an opportunity to support manufacturing businesses by helping to speed up the adoption of key technologies such as data analytics, robotics and 3D printing. Doing so will help to drive efficiency, productivity and create a deeper understanding of customer needs.
While a tax giveaway is unlikely due to uncertainties surrounding Brexit negotiations and the potential for further geopolitical shocks, the government needs to demonstrate it understands the challenges facing manufacturers. Like the EEF, Milton highlights there is an opportunity to enhance tax breaks and simplify the tax system in order to encourage take up of advanced technologies; helping to drive efficiency and increase productivity.
Specifically she highlights an increase to the Annual Investment Allowance (AIA), which is currently limited to £200,000 per annum. For manufacturing businesses, which are typically capital intensive, this limit is too restrictive. It could slow growth and make it harder for manufacturers to compete globally.
In addition, Milton makes a strong argument that there should be better communication of the support available to manufacturing businesses - both financial and knowledge based. For example, although a number of positive steps have been taken in recent years - Catapult Centres, Knowledge Transfer Partnerships and the Knowledge Transfer Network, these are frequently poorly communicated to the SME business community with the result that many eligible businesses miss out on opportunities to accelerate progress.