Budget 2020: industry reaction

6 min read

Rishi Sunak has presented his first Budget to parliament, promising funds to help companies and the NHS combat the coronavirus outbreak, as well as other announcements of R&D investment and £600m for infrastructure projects.

Here, we profile some of the reaction from the industry:

Stephen Phipson, chief executive, Make UK: “This was a welcome realistic and pragmatic statement which recognises the unparalleled times we are living in. Business understands that dealing with the impact of the coronavirus on individuals and the economy was always going to be the Chancellor’s priority and he has our full support in doing whatever is necessary to protect the public and the economy at such a difficult time.

“Aside from the overwhelming immediate priority the Chancellor has also recognised the need to turbocharge investment in long term measures which will boost the productive potential of the economy and support green growth. For too long the UK’s infrastructure outside the South East has played second fiddle and industry will welcome the resources devoted to improving links across the UK, in particular the strategic road network.

“In a world which is rapidly becoming digital the UK needs to stay at the forefront of research and innovation. Today’s measures to boost R&D will be applauded by industry and will help the UK lead in the technologies of the future.”

Geraldine Bolton, CEO, Confederation of British Metalforming: “There were a lot of headline announcements in today’s budget, but one significant move for manufacturers that may have been missed is the extension of the Climate Change Agreement (CCA) scheme to 2025. CCA, which we first lobbied for 20 years ago, allows businesses to reduce their Climate Change Levy bill in exchange for meeting targets to improve their energy efficiency and was due to close in 2023. Today’s extension gives companies another two years under this scheme and that could well equate to £4m of savings for CBM members every year. This is not just about financial savings, but it also gives manufacturers more time to consider innovative ways to reduce their carbon footprints without the burden of having to pay more taxes.”

David Nicklin, managing director of leading independent packaging manufacturer, Birmingham-based, Nicklin Transit Packaging: “It was encouraging to see so much focus on mitigating the impacts of Coronavirus. We are already seeing effects across the manufacturing supply chain both regionally and nationally, and SME manufacturing businesses like ours will face multiple challenges around personnel, reduced demand and client service over the coming weeks. We are encouraged by the availability of a new SME funding scheme and the cut in interest rates. Changes to statutory sick pay will also give comfort to staff and business owners alike, with as many as one in five workers potentially needing to self isolate. Not all firms will need to take advantage of the announced business interruption loan scheme but this will undoubtedly go some way to helping the most vulnerable ride out the storm.

"Looking beyond Coronavirus, the announcements on R&D investment are welcome in the context of Brexit as UK manufacturers look to develop fresh capabilities and forge new partnerships. Finally, sustainable packaging manufacturers like us will also have been heartened to see measures announced to encourage greater use of recycled and recyclable, greener packaging, as the UK takes further steps to honour its environment commitments.”

Mark Minihane, Tax Partner and Advanced Manufacturing & Mobility sector leader, EY: “The Conservative manifesto promised to increase the Structures and Buildings Allowance (SBAs) to 3%, and the R&D tax credit regime to 13%. These were delivered today, which is good news for the manufacturing sector.

“However, although the UK tax regime supports investment at face value through initiatives like R&D tax relief, patent box and capital allowances, our work with advanced manufacturing clients shows that many in the sector find the sheer volume and complexity of tax legislation challenging. Recent changes to the patent box rules and the intricacies of R&D tax credit calculations and capital allowances regime, mean it is not always straightforward to obtain tax relief for investment spend. We need a long-term strategy to tackle the tax base, with more and easier reliefs for genuine business expenses, to help boost investment in manufacturing.

“The Chancellor has responded to calls from a retail sector in distress and brought in further reliefs for business rates. However, we must not to forget that business rate reform is important for manufacturers too, enabling investment in new facilities in the right locations.

“There was also positive news for the automotive sector with fuel duty frozen and further investment in electric charging and road infrastructure (including a £500m pothole fund). However, there was a lack of detail around tax on electric vehicles, the extension of grants for plug-in hybrids, the VAT regime for electric charging away from the home, and electric vehicles used for work but with some personal use. Perhaps a missed opportunity to ensure the uptake of electric vehicles is to be become a reality.”

UK Steel Director General, Gareth Stace: “£600 billion of infrastructure investment is undoubtedly good news. The UK’s historic underinvestment, particularly outside of the south east, has long held key industrial regions of the country back, and it was vital that the Budget addressed this issue. However, it is critical that the Government spends this money strategically, ensuring the largest possible return for taxpayers by maximising the UK content of these major projects.

“UK infrastructure projects are expected to require one million tonnes of steel a year, a figure that will only increase in light of the Chancellor’s investment announcement. The Government could significantly boost the social and economic benefits delivered by these projects by taking a more deliberative approach to steel procurement. Indeed, the two million tonnes of steel projected for HS2 alone would deliver a £1.5 billion boost to the UK economy and safeguard at least 2,000 steel jobs, if UK produced steel is used. The Government must set clear objectives for steel procurement in these major projects, as happens in the United States, and an important first step would be signing the UK Steel Charter.

“Elsewhere in the Budget, it is hugely disappointing that yet again the UK Government has missed an opportunity to tackle some of the fundamental weaknesses of the UK’s industrial environment. Action for steel producers on sky high electricity prices and business rates reform are desperately needed to help establish a sustainable future of the sector, placing it on a clear trajectory towards a prosperous, low carbon future. The steel industry has called for just £50 million in order to help provide competitive electricity prices – if the Government can find £2.5 billion for potholes, then surely it can find £50 million to plug the gap with our nearest competitors.”

Tom Verner, Managing Director, Momentum Group: "The government has acknowledged the important role R&D has in the manufacturing industry by increasing the level of tax credits. There remains a concern however that so few companies are applying for R&D Tax Credits. There are still so many manufacturing businesses that are either not aware of R&D Tax Credits, incorrectly think they do not qualify or feel they lack the necessary experience to submit a claim. In fact, many companies are not claiming their full legitimate entitlement and could be losing out on tens of thousands of pounds.

“The message is now clear from the government that support for R&D Tax Credits is there and my advice to companies is to ensure they are getting the tax credits their R&D work deserves. Help is on hand and there are specialist companies who can help you with theprocess. Innovation breeds success. For every £1 spent on R&D an additional £2.55 is pumped back into the economy.”

Andrea Reynolds, CEO and co-founder, Swoop: “Retailers and tech firms have received a welcome shot in the arm from today’s budget but it’s incredibly disappointing that businesses at the heart of our economy – Britain’s manufacturers - haven’t been given the support they need.

“Many of the UK’s manufacturers have demonstrated great resilience to survive past recessions and they are now taking a serious hit from coronavirus, whilst also being squeezed by the rise in the minimum wage, Brexit preparation and corporation tax – and for the average small business those losses alone are anticipated to be £53,500 this year.

“Our manufacturers are worth £393 billion in revenue but they were dealt a bad hand today and fresh plans should be put in place to support these firms that are vital to economic recovery in the months ahead.”

John Rozenbroek, CFO and COO, Capify: "This Budget delivered some welcome surprises for SME businesses in the UK, with the government going further than expected with business rate cuts and a pledge on Statutory Sick Pay to help tackle the potential threat of coronavirus. A commitment from the government to pay Statutory Sick Pay for up to 14 days for any workers impacted by coronavirus will also help the cash flow of many UK SMEs. We're pleased to see the government go further than expected with this measure.

"An announcement from the Bank of England that it will also offer new incentives for banks to lend more to SMEs was also made today, however, the specific details of this are still unclear. Banks have traditionally made it tricky for many SME businesses to access funding and it remains to be seen if these schemes will actually deliver what is hoped.”

“It’s disappointing that the government wasn’t able to provide any certainty or security around the future of the Annual Investment Allowance (AIA). An extension to the limit could have proved extremely useful to many manufacturers and could provide business owners with the opportunity to invest in much needed technology and innovation, supporting them in their future growth plans.”

Brian Holliday, Managing Director, Siemens Digital Industries: “This has been a budget dominated by extraordinary healthcare measures but has also found ways to invest in sustainability and innovation. We welcome the business measures to support companies and jobs in difficult times whilst keeping an eye on longer term stimuli for our economy such as R&D investment going up by £22bn and the increase in rate of R&D expenditure credits from 12% to 13%. Sustainability has featured too in both clean energy provision and clean transportation. Advanced industrial technology and services are now a clear part of the answer to many of the infrastructure and industrial challenges we face.”