A new survey from accountancy and business advisory BDO has found that two thirds of manufacturers (65%) would commit to greater investment in the UK if incentives for capital expenditure were increased.
Additionally, the poll of over 200 UK manufacturers found a majority (61%) who said that a simplification and extension of Research and Development tax reliefs would help drive further investment in innovation.
The new figures are released to coincide with the pre-Budget publication of BDO’s Manufacturing Manifesto, which details a number of targeted tax measures designed to drive a post-COVID-19 recovery in UK manufacturing.
The UK’s manufacturing sector is vital for the UK economy, accounting for £191bn of output, 53% of total exports and 2.7 million jobs. However, the latest data from Make UK, the manufacturers’ organisation, shows that investment intentions have suffered badly as a result of the pandemic.
BDO’s key proposals include:
- Introducing new tax credits for manufacturers that invest in reducing carbon emissions – one of a number of measures designed to help drive the green economy agenda.
- Extending the current Annual Investment Allowance limit at £1m until the end of the current Parliament in 2024. This would give manufacturers the opportunity to commit to significant capital investment for the medium to long term.
- Increasing the number of Enterprise Zones to help encourage manufacturing clusters and support the Government’s levelling up agenda.
- Simplifying and extending the current rules on employee ownership to drive additional entrepreneurial investment in UK manufacturing.
- Introducing new tax incentives that align education or training with specific skills such as robotics and automation that are required by advanced manufacturers.
- Establishing a new Government-backed manufacturing trade network and exporting academy to help UK manufacturers break into new international markets and access expert advice on overseas regulation, intellectual property and tax compliance issues.
Richard Austin, BDO’s Head of Manufacturing said: “We recognise that the Government is under significant pressure to recoup the costs of fighting COVID-19 but it is vital that the UK’s business tax environment remains competitive relative to other major industrialised nations. Ill-judged tax rises now could have a hugely detrimental impact on manufacturing investment and the UK’s reputation as a place to do business.
“Clearly there are multiple demands on the Government’s resources, but there is a strong case for policymakers to adopt a bespoke approach to the manufacturing sector given its pivotal role in the UK economy and its unique capital and incentive requirements. What’s required now is a clear strategy to support manufacturing in the years to come.”
Simon Bird, BDO’s Tax Lead for the Manufacturing Sector said: “With the right investment conditions, there is a huge potential for manufacturing to support a green economic recovery through the introduction of new technology and digital transformation. A clear, targeted and balanced tax policy would deliver significant benefits for the UK as a whole, helping to drive up productivity and level up the regions.”
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