With thanks to our colleagues in BDO UK.
As far as “mini-budgets” go, this certainly hasn’t felt small for the manufacturing sector with a number of announcements promising additional reliefs and certainty to support investment in the sector. The details are set out on our Mini Budget page.
With growth at the centre of the government’s plans for the economy as a whole, we would still encourage the Chancellor to set out a specific policy for the UK’s manufacturing sector that can provide certainty over future policies. This would encourage and drive investment in the sector’s long term growth.
Manufacturing and Energy
The Chancellor’s re-iteration of the earlier announcement of support for businesses in the face of spiralling energy costs will be welcome by manufacturers. Many have seen both their profitability and even their longer-term viability negatively affected. While the cap doesn’t relieve the pressures that manufacturers are already under, it does at least set a limit to how much worse they can get. It should provide some certainty, crucial for making important investment decisions.
A longer-term promise of support would have provided more comfort and confidence than the current six month time frame, with a review after three months. Make UK has also raised concerns that if the relief iss to be given after bills are paid then cashflow pressures might be too much for some manufacturing businesses.
The following polices were set out by the Chancellor;
- Reducing employers’ National Insurance burden by reversing the recent rate increase
- setting the Annual Investment Allowance at £1m permanently which goes even further than the Manifesto’s call to extend the allowance until at least 2024
- Creation of “Investment Zones” offering specific tax reliefs and incentives to businesses investing in certain areas
- Expanding support for the Seed Enterprise Investment Scheme (SEIS) and Enterprise Investment Scheme (EIS) which drive significant investment in the manufacturing sector
Manufacturing and Investment Zones
There are 38 locations currently in discussions with the Government about the Investment Zones. The specific locations and some of tax incentives are still to be confirmed. There are echoes of the business rates and stamp duty relief, increased tax relief for capital investment and relief for employers’ national insurance of the Freeports scheme.
The absence of customs duty reliefs for Investment Zones suggest they are design to drive demand within the domestic market. It will be interesting to see how Freeports and Investment Zones interact and overlap.
Beverages sector and alcohol duties
Manufacturers in the beverage industry may welcome the cancellation of planned increases in alcohol duties and the transitional measure introduced in respect of Wine duty.
Draught relief has also been extended to include smaller kegs to help support smaller beer and cider producers. It will be hoped that these cuts will be enough to preserve profit margins in the face of weakening consumer confidence.
R&D
The sector is still waiting for details of the changes to Research and Development incentives announced in the Spring Statement. Indeed, we need confirmation that the new government will proceed with them at all.
If you have any questions, please contact Claire McGuigan or Karen Doherty,