Here, we look at industry reaction to some of the key points in the Budget.
The Budget as a whole has been welcomed by many in manufacturing, with Alan Laing, Managing Director for UK & Ireland at IFS, calling it "a shot in the arm" for the sector.
"Given the difficult circumstances facing the Chancellor Industry will welcome the certainty and clarity he has provided about the route forward," said Stephen Phipson, chief executive of Make UK. "This statement pursues a positive and fair middle road which balances the short-term need to avoid squeezing the recovery before it has started, whilst avoiding any artificial boost given the inevitable strong bounce-back once the economy begins to open up.
However, many have called for more clarity. David Nicklin, managing director at Nicklin Transit Packaging, the UK’s largest independent packaging provider, said: "Despite trading conditions showing some signs of slowly returning to stability, manufacturers continue to face multiple financial pressures in the form of materials shortages and price rises, alongside ongoing supply chain challenges and red tape caused by the Brexit process."
Investment incentives
The Chancellor also announced a raft of measures to encourage businesses to invest, both in new technology and new skills. Firms will be offered a tax break (called a Super Deduction) to invest in new equipment, something Phipson said will "turbocharge investment" in the short-term.
Incentive grants for apprenticeships will rise to £3,000, and £126 million has been made available for traineeships. In addition, a new visa scheme was announced to help start-ups and rapidly growing tech firms source talent from overseas.
Commenting, Mark Minihane, EY UK & Ireland Advanced Manufacturing & Mobility Tax Leader, said: "Manufacturing businesses will welcome the super-deduction incentive for investing in new equipment, and will be eager for more detail on what exactly this will cover. However, the two-year period for the relief is a little disappointing.
“There was a lack of wider investment stimulus. There was no mention of the patent box regime and no extension of the current R&D tax relief regime, although the announced review of the latter is welcome."
Commenting on the announcement of support for apprentices, Ben Fletcher, Executive Director at Make UK said it marked a "step in the right direction", although he added: “However, these are still baby steps and with apprenticeship starts showing no signs of bouncing back, employers want to see bolder measures to support apprenticeships. This includes immediately easing the transferring of funds to SMEs and companies in their supply chains, and allowing the use of Levy funds for wider costs including capital expenditure sooner than later.”
Tax rises imminent
While income tax has been frozen, corporation tax is set to rise to 25% in 2023.
"This will come as no surprise given whispers of a tax increase have been circulating for months, and Industry will accept it is a price that needs to be paid in terms of fairness and to help the economy return to more bullish times," said Phipson. “However, the change comes at a challenging time for manufacturing, particularly for SMEs dealing with the aftermath of Brexit. Many of these firms have already delayed VAT payments to the Treasury and so we must tread carefully on an already fragile market lacking in incentives to do more business. Nevertheless, increasing corporation tax is only one way of improving the UK’s fiscal position. An alternative means is to direct investment to growing the size of the economy and this should always be our long-term focus."
Freeports
Arguably the Chancellor's biggest announcement was saved until last, with the confirmation of eight 'Freeports' - special economic zones where a country’s normal tax and customs rules don’t always apply - across England. This was welcomed as a way of boosting regional investment by industry. Phipson said that "Freeports could play an important role as part of the Government’s levelling up agenda from a regional development perspective, and could act as a booster mechanism.”
Additional commentary:
Tony Hague, CEO of PP Control & Automation: "I've been saying for some time that the UK lags behind global competitors in automation and robotics and the Super Deduction for companies investing is absolutely massive. It appears the Government has finally woken up to the fact we need to create a tax system that will encourage investment across the supply chain and investment that drives long-term efficiency and productivity."
Paul Struthers, MD, Sage: "This was a strong Budget for both SMEs and the wider levelling up agenda. This economic recovery will be a marathon and not a sprint. We welcome the short term relief that will come from extensions to Furlough and Business Rates. Help to Grow also provides a fantastic platform to encourage SMEs to invest for growth in the future. However, Super Deduction does not incentivise investment in technology and digital tools, and presents a missed opportunity for the small business community – who we know, want to invest but can’t."
Stephen Morley, President of the Confederation of British Metalforming: "This was probably the most eagerly awaited budget in living memory given the huge effects of the pandemic and fall out from Brexit. Our members wanted to avoid ‘Cliff Edges’ and increases in taxes following the events of the past year, so therefore it is pleasing news that the Furlough scheme has been extended until September, with the government still paying 80% of salary - though employers will need to provide 10% and 20% from July and August respectively.
"This is the Government’s most successful scheme and its impact cannot be underestimated. Not only has it protected jobs and retained skills, but given millions of people hope that they can get through this pandemic, even more so now there is a potential end in sight."
Chris Barlow, Head of Manufacturing, MHA: "“Despite positive steps announced in today’s budget, the ongoing issues of dealing with Covid-19 and Brexit still pose a significant challenge to the UK manufacturing sector. While the vaccine rollout will help the former, the challenges of red tape created by the latter still need to be addressed. Today’s budget did not go far enough in lifting the dark clouds of Brexit.
“However, the Chancellor seems to have somewhat succeeded in emboldening the manufacturing sector. The introduction of super-deductions will encourage much needed investment, allowing businesses to offset the cost of new equipment against tax, plus an additional 30%. What’s more, the new Freeports will bring tax reliefs and are a vital opportunity for regeneration and investment in the UK’s road to recovery."
Jonathan Dudley. head of manufacturing, Crowe: "The introduction of the 130% super deduction on Investment, from first look, seems to absolutely answer the call that we were crying out for. To attract investment, enhanced relief above 19% was required and the effective 24.7% tax incentive for capital expenditure is a welcome introduction. Introduced for the next two years, it will incentivise business to invest in new machinery and processes to improve productivity and competitiveness. Given that the headline rate of corporation tax rises in two years anyway to 25% for larger profit makers, it does actually advance the tax relief to largely that level; early.
"A surprise came in the form of no immediate corporation tax increase. However, the rate rise in two years’ time, with the reintroduction of both the small company and marginal tax rates, will provide a level of complexity that will not be welcome for many and one which, when it does arrive, will drive decisions on investment, revenue expenditure timing and indeed maybe even timing of business to manage profit streams given that a marginal rate of corporation tax is always effectively greater than the full rate."
