The headlines might look attractive at first glance for business and manufacturing in particular – investment in roads, rail, broadband and mobile communications should, if spent domestically, be a growth generator for our manufacturing supply chain, as should the continued investment in offshore wind.
Further investment in innovation and Research and Development (R&D) should also be an encouragement, although I wait to see the detail on how this will be spent and whether it will be truly available to UK innovative businesses. It could just be a continuum of the vastly oversubscribed SMART award system, which leaves so many innovative businesses wanting. The proposed reform to R&D tax credits could prove to be less exciting than it sounds.
More money made available to the British Business Bank in the regions, to drive access to finance, is also welcome; but I hope that the method of distribution and the programmes for delivery, take full account of the genuine needs of businesses.
The scale up of visas to attract global talent is welcome news. This has been a perennial problem for innovative UK businesses and it will be good to see this starting to work in practice. Our universities have been educating people from across the world, in STEM related disciplines, and it would be great to see the UK economy benefiting from their expertise.
It is also great to see the Annual Investment Allowance (AIA) extended at £1 million until 2023, that is when the headline Corporation Tax rate goes up. So even combining this with the super deduction that the Chancellor reminded us all about, this merely achieves a 24.7% effective tax deduction on capital investment up to that level. Therefore, can we expect AIA to be reduced or removed along with the super deduction when the new 25% rate comes in? Hopefully both will stay, as the value of the super deduction would then effectively be 32.5% tax relief on capital investment.
The business rate reform will also benefit manufacturers but as this doesn’t come in until 2023, the reduced cost will attract higher tax on the resultant profits.
It’s good to see continued investment in skills. Hopefully, however, this will be combined with reform of the apprenticeships scheme as has been called for in Crowe’s annual Manufacturing Outlook Survey.
Support and concessions to the transport sector and the fuel duty freeze will help to hold some cost rises, but the Chancellor is clearly in no hurry to address the immediate power pricing crisis or supply chain issues. This might signal that these factors are a matter for market forces rather than government, as highlighted in the Budget. There was nothing to help businesses unable to attract investment due to the substantial COVID-19 debt on so many balance sheets in the supply chain. The government has a vested interest in supporting those businesses as they have a 80% ‘stake’ in terms of their guarantee to the banks, so I hope that, unless they do listen to lobbying pressure, that the desire to allow market forces to hold sway, doesn’t cost the public finances more than expected.
So the Budget seems to be thin on support for a manufacturing sector, which the government is reliant on, to drive innovation, skills and job and wealth creation, as well as delivering their infrastructural projects and levelling up. Without workable funding, access to affordable power and raw materials, manufacturers cannot produce, cannot innovate, employ or improve the skills base. There are good strategic signs for the future but there needs to be more tactical short-term measures to get there.*The views expressed are the author’s and not ICAEW’s.