The Manufacturer speaks with the Engineering Employers’ Federation’s chief executive (EEF) Terry Scuoler (pictured) about the impact of R&D tax credit on manufacturers and likewise for the Chancellor’s announcements.
TM: What is your initial response to the Autumn Statement?
TS: “What came out of the Autumn Statement has been trailed over the last few days. There are clearly some positives coming out of today’s report, such as loosening the rules and regulations around employment law, which I welcome. Reducing the power of employment tribunals brings the balance between employee and employer into greater alignment, that’s a positive.”
TM: What does the R&D tax credit mean for manufacturers?
TS: “Innovation and growth are very closely linked to growth. The announcement that from April 2013 that we will get that tax relief accounted for above the line is a positive. We spend about 1.2% of GDP on R&D, compared to about 2% in Germany and the USA.”
“Getting it above the line helps the larger companies and those making tax losses. The larger companies who have got the option to carry out R&D in India or elsewhere, there is a positive in steering them towards the UK.”
TM: Does this improve the prospects for increased investment in UK manufacturing?
TS: “Moving it above the line, in terms of regarding it as a credit against cost, is the model that most of our competitors in Western Europe and North America use as well. It doesn’t make us a better place to invest but it moves us more in line with competitor nations.”
TM: In general, how does the UK economy fare compared to our European counterparts?
TS: “We have got some first class universities and we produce some of the best innovators and engineers. Sometimes the link between innovation and market application and commercial exploitation of it is poor. We have seen some good British ideas being exploited by overseas businesses.”
TM: What’s missing from the announcement?
TS: “We were hoping for a positive steer on capital allowances to help businesses. Short term uplift and 100% capital allowances for a period of two years were some things we were pushing for.”
“Given that we are seeing investment intentions slip and the gap between investment intentions and actual investment possibly being at its widest for many years, this would have encouraged and strongly incentivised business owners to invest in plant machinery.”
TM: What do you make of the £5bn investment in infrastructure?
TS: “I would welcome £5bn spend on infrastructure. This is pure Keynesian economics. The £1bn offer to the consumer via a reduced petrol levy could have been spent elsewhere in areas that will effectively encourage growth.”
TM: Is it petrol price freeze just a people pleaser?
TS: There is an element of the popular in this but is perhaps geared towards easing the squeeze that people are having. Is it best positioned to incentive growth and investment? I’m not sure if it is.
TM: What is your view on the £1bn designated for regional growth investment?
TS: It’s a modest step, a useful measure but nothing to get too excited about.
TM: What is your opinion on the regional growth fund?
TS: Designed to help areas that will see the greatest impact of public sector redundancies. To what extent the regional growth fund will create innovation and growth; the jury is still out.
TM: Will businesses not just go where is naturally most profitable for them, is this government interference or active help?
TS: If it encourages a British or foreign company to build a factory in the UK, in an area that is depreived, then I support that. It is a form of positive intervention and I support that.