Summer Budget 2015: industry reacts

Posted on 8 Jul 2015 by Jonny Williamson

The Manufacturer gathers the opinions of industry leaders and manufacturers to Chancellor George Osborne's 2015 Summer Budget.

Terry Scuoler, CEO, EEF
Terry Scuoler, CEO, EEF

Commenting on the Budget, Terry Scuoler, Chief Executive of EEF, commented: “The Chancellor has served up a number of aces in supporting business investment allowances; plans to cut employer national insurance contributions; phased reductions in Corporation Tax, and funding for road improvements.

“His commitment to defence funding is welcome and will encourage investment in key technologies. I also support the principle of establishing a new National Living Wage.

“However he has double faulted on the training levy which manufacturers will be sceptical about. Until we see the detail it’s not clear how this will help deliver the high quality apprenticeships we urgently need. Employers must be in the driving seat on this reform to ensure we get the right quality of apprenticeships and training. There will be no tolerance for recreating the failed skills bureaucracy of the past.

“The budget clearly recognises the need to prioritise measures which lay long-term foundations for sustainable growth and improved productivity. Industry will welcome the fact this has remained the focus of attention despite the tough choices which are necessary to balance the books.”

Paul Raynes
Paul Raynes, director of policy, EEF.

On the Chancellor’s proposals for a training levy, EEF’s director of policy, Paul Raynes added: “Manufacturers will be sceptical about a training levy, especially as their financial investment in high quality apprenticeships already far outweighs the public subsidy available to them.

“The Chancellor has given welcome reassurance that the levy would only apply to large firms and will be directly controlled by employers.

“We look forward to discussing with the Government the best way to ensure every penny raised would be spent on valuable training that employers actually need and want. There will be no tolerance among businesses for re-creating the failed and costly skills bureaucracy of the past.”

Lee Hopley, chief economist, EEF.
Lee Hopley, chief economist, EEF.

Regarding the changes to business taxation, chief economist at EEF, Lee Hopley noted: “The Chancellor put predictability and stability at the centre of some welcome tax measures for industry.

“Confirmation that the investment allowance will proceed on a permanent basis at £200,000 ends the seven year rollercoaster ride this part of the tax system has been on. It will give small businesses, in particular, the certainty they need about how investments in productivity enhancing equipment will be treated for tax purposes.

“Businesses large and small will also welcome the Government giving forward visibility of the phasing of lower Corporation Tax rate as public finances allow. Importantly, a new corporate tax roadmap promised by April 2016 sees the Chancellor maintaining good form on giving business visibility about future priorities for reform.”

Describing the Budget as “double edged for business”, director General of the CBI, John Cridland stated: “Firms will welcome measures to balance the books and boost investment, but they will be concerned by legislating for wage increases they may not be able to deliver.

John Cridland, director general, CBI.
John Cridland, director general, CBI.

“Firms have been unwavering in their support for the Chancellor’s deficit reduction plans and will welcome the clarity that the new fiscal rules provide. Other standout measures include making the Annual Investment Allowance permanent at £200,000, which the CBI called for, as well much-needed investment in our roads network.

“The further reduction in Corporation Tax is a welcome surprise but tax reductions for employers don’t appear to match the businesses most affected by a rise to £7.20 in the National Minimum Wage next April – a 7% increase.

“The CBI supports a higher skilled, higher wage economy, but legislating for a living wage does not reflect businesses’ ability to pay. This is taking a big gamble that the labour market can absorb year-on-year increases of an average of 6%.

“Firms want to play their part in training up more apprentices but an apprentice levy is a blunt tool. A volunteer army is always better than conscription, but the CBI will work with the Government to make the best effect of this measure.”

Dr Helen Meese, Head of Engineering in Society, IMechE.
Dr Helen Meese, Head of Engineering in Society, IMechE.

Head of Engineering in Society at the Institution of Mechanical Engineers (IMechE) Dr Helen Meese said: “There are some welcome proposals in this Budget, but Government needs to go much further if it wants to secure the country’s skills, economy and NHS.

“The introduction of the revised Vehicles Emissions Duty [VEDs] will help secure a sustainable method to fund the UK’s road network, the increase in the Annual Investment Allowance is a welcome legislation for SMEs, and plans to increase the number of apprenticeships by 3 million via a levy to large companies could also help boost skills.

“However there is a need for Government to show clearly how it will ensure that these apprenticeships will meet the high standards needed in engineering. The Government should also look at ways companies can use this apprenticeship levy to support their supply chain and SMEs.

“The UK’s skills shortage is one of the most critical issues facing the country. Without engineers we have no hope of making the large infrastructure projects needed in the energy, transport and health sectors a reality.

“The Chancellor was keen to stress that the Government’s biggest priority is the NHS and it is high time greater priority is placed on the role biomedical engineers and the equipment they design, create and maintain play in hospitals.

“It is vital that engineers are at the heart of the NHS’ planning, procurement, use, calibration and maintenance of high value equipment. We urgently need a Chief Biomedical Engineer in every NHS acute trust so that properly informed choices on these issues can be made in the best interests of patients and taxpayers.”

Brian Hoiliday, Divisional Director Industry Automation, Siemens UK
Brian Hoiliday, managing director of Digital Factory, Siemens UK & Ireland.

Managing director of Digital Factory – Siemens UK & Ireland, Brian Holliday commented: “As recognised by the Chancellor, productivity is key to economic growth and prosperity, and we are looking forward to hearing more about the Government’s productivity plan on Friday.

“Investment in technology is key to boosting productivity in manufacturing for companies large and small. We welcome the certainty created by setting the Annual Investment Allowance at £200,000 which will help stimulate plant and equipment investment. We remain less clear however, about R&D and science spending which is just as vital for long term growth.

“I welcome further devolution in Manchester and the North West and support the £30m funding announcement for Transport for the North with its integration intent and Oyster payment system. Electrification of the Manchester Leeds line remains a local priority and should remain a local political priority too.”

Mike Hawes, chief executive, SMMT.
Mike Hawes, chief executive, SMMT.

Chief executive of the Society of Motor Manufacturers and Traders (SMMT), Mike Hawes said: “We recognise the current VED system needs to be reformed and highlighted this in a recent report. The Chancellor’s Budget announcement on the regime came as a surprise and is of considerable concern.

“While we are pleased that zero-emission cars will, on the whole, remain exempt from VED, the new regime will disincentivise take up of low emission vehicles. New technologies such as plug-in hybrid, the fastest growing ultra low emission vehicle segment, will not benefit from long-term VED incentive, threatening the ability of the UK and the UK automotive sector to meet ever stricter CO2 targets.

“The introduction of a surcharge on premium cars also risks undermining growth in UK manufacturing and exports. British-built premium cars are in increasing demand at home and globally, and the industry helps to support almost 800,000 jobs in the UK. Levelling a punitive tax on these vehicles will almost certainly impact domestic demand.”

Director at packaging manufacturer Boxes2Move, Craig Donnelly noted the relative lack of measures to be put in place to encourage housebuilding:  “Much publicity is being given to the moves taken in devolving power to Northern cities, however there was no mention of how the Government plans to provide for those who may consider moving there.

“The aim to build up other parts of Britain to balance with London can really only be addressed with the provision of new homes. However, the bold approach to building the Northern Powerhouse, along with the process of devolution to local councils, elected mayors and the promised £30 million for developing transport links, is sure to eventually breathe new life into the Northern economy, and as a result the housing market.”

Commenting on measures for SMEs and manufacturers, managing director at Birmingham-based Nicklin Transit Packaging, David Nicklin said: “The increase in the Annual Investment Allowance to £200,000 and the further reduction in Corporation Tax are the headline announcements for mid-sized manufacturers like ourselves.

“Both represent welcome news and should help stimulate the essential investment Midlands manufacturers need to make to remain competitive in a globalised and highly competitive economy.

“While it was good to hear the Midlands referenced as the country’s engine of growth, we now need to see greater steps taken towards delivering the HS2 project and more devolution for the city of Birmingham and wider Midlands region.”

UK general manager of workforce management solution provider, Kronos, Brenda Morris believes more can be done right now to bridge the gaps that are slowing productivity down across the UK manufacturing sector.

She said: “The Budget is once again speaking to the makers of the UK and various moves including the permanent rise of the Annual Investment Allowance to £200,000 to keep firms investing, as well as the further devolution of powers to local councils in the North and the Midlands so that they can create local enterprise zones and set trading hours.

“These mark a good step forward that will see eventual improvements in productivity. But more can be done right now to bridge the gaps that are slowing productivity down.

“People and technology are at the heart of this sector and combining the two will help improve the UK’s low productivity quickly. It’s not about making people work harder or longer, or even overhauling transport infrastructures. It’s about having the right tools in place that provide a consolidated view over labour effectiveness within an organisation, in order to tackle waste and implement best practise.

“Now more than ever, organisations in the manufacturing sector need to have the ability to make the right decisions about labour and match these to production demand so that non-productive time is eliminated and the overall quality and output of these organisations can be immediately increased.”

Chairman at Chesire-based Oliver Valves, Michael Oliver stated: “It’s pleasing to see the Chancellor go a step further from previous Budgets and announce further cuts in Corporation Tax and a boost to the Annual Investment Allowance.

Incentivising entrepreneurship and encouraging more firms to invest in expansion and trade overseas are key to continuing the recovery’s momentum. By reducing the tax bill and allowing businesses to keep more of their profits, more can be spent on creating jobs and driving growth both at home and abroad.”

Commenting on the road expenditure measures announced, Simon Dixon, transport partner at Deloitte said: “More fuel-efficient and low-emission vehicles, lower car ownership, particularly in cities and amongst young people, along with the rise of car sharing and new technology, mean that it will be increasingly difficult for the revenue raised to cover all the road expenditure needed.

“Allocating specific money, and ring-fencing long-term capital expenditure, will enable Highways England – and their devolved equivalents – to make sensible long-term plans for major maintenance and improvement works.

“However, this may still require a future government to seriously consider some form of road charging with increasing pressure on the network, new travel patterns emerging and limited funding available.”

CEO and co-founder of online accounting software provider FreeAgent, Ed Molyneux commented: “This Budget is a mixed bag for small businesses. On the one hand, there’s good news for growing business taking on staff as they’ll benefit from a higher Employment Allowance – but that will be hugely tempered by the introduction of a much higher Living Wage that they will have to pay those staff.

“However, there’s no good news for small businesses who aren’t looking to take on staff. Directors of limited companies who are the only employee will no longer benefit from the Employment Allowance, which will be a big blow to them, and there are no new incentives or support for entrepreneurs launching a solo startup business.

“I would have liked to see IR35 being scrapped, or an overhaul of how VAT MOSS affects the very small businesses, but the main Budget announcements seem to be more focussed on very large companies or smaller businesses who are already enjoying success and are ready to grow. For the average freelancer, contractor or startup business, there’s not much to get excited about.”

Director of machine vision solutions supplierm Industrial Vision Systems, Earl Yardley noted: “The more investment and tax breaks within manufacturing, the more stability there is for key industries, such as pharma, medical device, and automation, which, in turn, will also enhance the performances of UK engineering firms.

“The Chancellor should be applauded for fixing the Annual Investment Allowance for capital allowances at £200,000. We have already seen a significant increase in investment made in new automated production lines and cells across the UK manufacturing base. By establishing a long-term rate, this is sure to boost productivity and help leverage the UK at the forefront of the global manufacturing sector.”