June Budget: Frustration from manufacturing over Budget
Manufacturers have raised concerns about how serious the Government is on rebalancing the economy after the Budget revealed plans to take away incentives for the sector to invest.
Industry groups have welcomed the move to reduce corporation tax from 28 per cent to 24 per cent over the next four years, and praised the Chancellor’s tough action to bring the deficit down.
But the manufacturing body EEF said plans to decrease investment incentives such as the capital allowances rate and the annual investment allowance would not help in rebuilding the manufacturing sector and in creating jobs.
Martin Wassell, Midlands director of EEF said: “Today’s Budget may have given manufacturers much-needed clarity on how the Government will go about reducing the deficit, but the short-term pressure to start tackling the deficit means the Chancellor has only done part of the job of rebalancing the economy.
“While businesses will welcome long-term reform and predictability of corporation tax and have been spared the worst impact of changes to capital gains tax, predictability has come at the cost of competitiveness.
“In recent weeks, manufacturers had been encouraged by strong commitments from the Prime Minister and the Chancellor on the role of manufacturing in a better balanced economy.
“They will now be left wondering where the necessary growth and investment will come from, given the cuts to investment allowances and capital budgets.
Steve Radley, director of policy for the EEF, added: “From a manufacturing point of view, although it’s welcome to see the rate of corporation tax coming down, our biggest concern is that incentives to invest are being cut back.
“The Chancellor has cut back capital allowances from 20 per cent to 18 per cent he has also reduced the value of the annual investment allowance.
“Although he is phasing that in, it’s that increase in business investment that we need to start creating a stronger and rebalanced economy.
“This is something that’s going to hit smaller growing companies that are looking to invest.
“We have heard people in Government talking about manufacturing playing a greater role in rebalancing the economy.
“This reduction in investment allowances will make it hard to achieve that aim.”
Meanwhile in terms of infrastructure, an area which provides many big contracts to the region’s manufacturers, the Institution of Civil Engineers has given a positive reception to the Budget. ICE president Paul Jowitt said it gave industry a clear signal that the Government was committed in the long-term to determining infrastructure priorities.
He said: “Unlocking private investment will be crucial to delivering the infrastructure needed to plug potential energy shortfalls and retain the UK’s global competitiveness, so confirmation that strategic body, Infrastructure UK, will remain in place is very good news.
“This will help reduce political risk and give industry increased confidence to invest, however it must be backed up by a planning system that is fit for purpose. The renewed commitment to the creation of a green investment bank and the reassurance that Government will consider a range of options for its scope and structure, is also very encouraging.
“It is estimated that the UK will need to invest £40-50 billion per annum in infrastructure to secure the UK’s future economic competitiveness and aid the shift to a low carbon society.
“Such a bank should operate in a way that reflects the scale of the task at hand – we look forward to assisting the Government on their proposals later in the year.
“The onus is now on industry to demonstrate value for money, both to the client and the public.
“We look forward to working with Infrastructure-UK on their investigation into reducing the costs of the delivery of major projects.”