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MTA comments on Budget

Chancellor George Osborne opened his 2014 Budget statement with the claim that it was one for ‘the doers, the makers and the savers’. If there wasn’t much in way of changes to the main tax rates, with personal tax left as it was and next year’s Corporation Tax cut already long announced, there were some eye catching initiatives aimed at savers. There were several new tax reliefs and a big shake up of the pensions industry, including ending the practice of effectively forcing people to buy an annuity, was announced.

For manufacturers though there were some really welcome policies. Securing a fairer system of capital allowances has been a long term aim of the MTA and it formed the central ask of our Budget Submission. It was therefore gladdening that the Chancellor doubled the rate Annual Investment Allowance to £500,000, a level that should make a real difference to a lot of manufacturing businesses. Less welcome was his stating that the changed rate would only be in place until the end of 2015. These temporary rates do not help businesses plan on a long term basis and we will be continuing to press for the change to be made permanent. There is also the issue of the other main component of the capital allowances system, the Writing Down Allowance, which at its current rate of 18% is too low to take account of modern machinery. But it is refreshing that politicians, who were reducing these rates as recently as 2010, are getting the message - watch this space in 2014 for a lot more activity.

There was good news on support for exporters as well, with a doubling of UK Export Finance’s budget for direct lending, to £3bn, the centre piece. The MTA has long argued that UK companies have been at a disadvantage in global markets because of a lack of engagement with export finance tools on the part of Britain’s big banks. Members report that firms from countries such as Germany, work so closely with their banks as to effectively make them part of their teams when they are negotiating major foreign orders. That can give them a huge advantage over UK firms who too often can feel that they have to clamber through a range of bank imposed hoops. Enabling UKEF to take up some of the slack is a really positive step.

We even saw some steps forward on an issue which has been a continual thorn in the side of UK manufacturing, namely energy prices. The Carbon Price Floor was capped, a major demand of the energy intensive sectors and there was an extra £1bn in compensation to help those in some of the most energy intensive industries to compete with countries where industrial energy prices are much lower than they are here (ie. nearly everywhere).

Three new research centres were announced; the Alan Turing Centre studying the uses of ‘big data’, a centre for Cell Therapy and a centre for the exploitation of graphene. There was funding too for new doctoral training centres which will focus on STEM subjects. Also on the research theme there was an increase in the rate at which loss making SMEs can claim R&D Tax credit, from 11% to 14%.

Overall it was a pretty good package for business, with the boost to the Annual Investment Allowance a particular standout. It’s heartening to see that the messages that the MTA and others have gained some traction but there remains a lot to do before we can be confident that UK manufacturers have the environment they need to thrive.