Budget reaction: Finally, manufacturers have a reason to invest

Posted on 4 Mar 2021 by Tom Lane

The super-deduction capital allowance announced in yesterday’s budget could be just what the UK’s makers have been asking for.

For many years, The Manufacturer amongst others within the UK manufacturing sector have been pleading with the government to incentivise buying new capital equipment.

We have consistently heard that “the UK has a productivity problem, the UK doesn’t invest enough in new technology, the UK is falling behind our international counterparts in terms of automation.”

Yesterday’s budget has brought some good news, with the introduction of the super-deduction capital allowance, we could finally be in a position to super charge the UK’s manufacturing sector and realise our Industry 4.0 goals.

From 1 April 2021 until 31 March 2023, companies investing in qualifying new plant and machinery assets will be able to claim:

  • a 130% super-deduction capital allowance on qualifying plant and machinery investments
  • a 50% first-year allowance for qualifying special rate assets

The super-deduction will allow companies to cut their tax bill by up to 25p for every £1 they invest, ensuring the UK capital allowances regime is amongst the world’s most competitive.

Automation Digital Transformation Smart Factory Manufacturing _155386817 STOCK IMAGE

In a recent report we published with IBM we found that more than two-thirds of manufacturers (67%) have accelerated their adoption of digital technologies as result of the Coronavirus pandemic.

With just 16% of manufacturing organisations choosing to pause their adoption projects, it is clear that the majority of businesses now recognise the strong correlation between digital tools and increased productivity, efficiency and resilience.

The news of the super-deduction capital allowance could accelerate this adoption even further and help narrow that productivity gap.

Nick Hussy Managing Director of Hennik Group the publishers of The Manufacturer commented on the announcement saying “Manufacturer’s need a fertile environment to be able to grow, invest and be more productive. We have been saying for many years that manufacturing businesses need real support from the government to be able to invest in new capital equipment and it seems finally they have finally listened.”

He continued “This is a timely announcement and one we welcome, in November we will be bringing our Smart Factory Expo back to Liverpool, it’ll be the first large scale manufacturing live event since the end of lockdown. To put it simply Smart Factory Expo is going to be huge and a bonanza for automation, robotics and all manner of digital manufacturing solutions providers, we can’t wait to host it.”

The news has been welcomed by manufacturers with Rowan Crozier, CEO of Brandauer, one of the UK’s leading stamping specialists, commenting “As a manufacturing business committed to innovation and new product development, we welcome news of the Super Deduction tax for companies investing after the pandemic. We were already planning to spend on new technology so this move could help us purchase additional equipment that will improve our productivity and competitiveness even further.”

Tony Hague, CEO of PP Control & Automation, a specialist provider of strategic outsourcing manufacturing services to some of the world’s biggest machinery builders, said “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.”

“We’ve got some exciting plans to purchase an additional factory to help us cope with expansion and new opportunities in the healthcare, medical and renewables sector. This announcement will definitely help with this.”

Subscribe to The Manufacturer here and find out more about how to visit and exhibit at Smart Factory Expo here.