Budget 2016: a sigh of relief from industry

Last month I outlined industry’s three priorities for the Chancellor in the Budget as a troubling global and domestic economic climate takes hold.

Firstly, that business costs must not continue to increase. Secondly, that a tax reform agenda was set out to make the tax system for industry more competitive and in line with further investments in technology. Finally, that foundations were laid to tackle the productivity crisis.

Although it was a comparatively uneventful Budget for manufacturers, without any unexpected announcements, the Chancellor listened to calls from the sector for no new policies that would further increase the cost of doing business.

Having already seemingly abandoned plans to target private sector pensions and, with the Apprenticeship Levy and the National Living Wage in the pipeline, this was welcome news for manufacturers in the face of increasing political and economic uncertainty.

Some relief for manufacturers was found in the proposed further reduction in Corporation Tax to 17%, an important lever for keeping investment growth on track.

There was also further positive news, or perhaps relief, in that the Chancellor did not implement a suspected fundamental overhaul of the business rates system with the attendant risk of added cost to businesses bills looking set to increase less sharply in the future.

The continued inclusion, however, of investment in plant & machinery in business rate calculations is a disappointment for the steel industry in particular. As the tally of job losses continues to rise, the Government must do more to support steel this year.

While some further details on the Apprenticeship Levy were announced, we still have huge concerns as to how this will operate and impact on individual businesses. We would like to see the levy as a talent generator, not a tax and the announcement of a 10% top-up for levy payers did little to ally these fears.

The sector fully supports the ambition to create more high quality apprenticeships, but not the implementation of a levy to do so. There are due to be further details published in April and with the levy start date of April 2017 fast approaching, these need to provide as much information as possible on the implementation process.

Elsewhere in the Budget, there was the positive news that we have seen the last of the Carbon Reduction Commitment energy efficiency scheme, a freeze to the carbon support rates beyond 2019/20 and the development of a broadband investment fund.

These are all positive steps, but must be carefully targeted to ensure that business benefits from the measures.

Perhaps the most important announcement was one the Chancellor saved for last. If this Budget was about providing stability, then much of what he said regarding future generations will mean nothing if the British people vote to leave the EU.

The UK would be in uncharted waters, the consequences of which could be highly damaging. Given the announcement of a weaker outlook for the economy in the immediate future, the Chancellor was right to emphasise the importance of remaining in the EU.

Although the measures that I set out last month were not fully delivered, the overwhelming feeling among manufacturers will be one of relief. If there was one occasion when they wanted to be left alone with some stability in the face of global uncertainty than this was probably it.

The icing on the cake, however, would have been setting out a broader strategy for industry which still remains a gap in the Government’s armoury and, to date, for which it has shown no great enthusiasm.