Chancellor needs to act to save UK manufacturing from a wave of damaging tax changes

The UK manufacturing sector urgently requires more long-term incentives to boost investment. The Spring Statement needs to be the time to get the ball rolling on this because a series of damaging tax changes are currently heading businesses’ way. Some will come into effect in April, like the National Insurance (NI) rise, while others are pencilled in for March 2023, such as the rise in Corporation Tax. In addition, the sector continues to be hit hard by persistent supply chain issues, worsened by Russia’s invasion of Ukraine.

The NI rise will hurt, draining away funds that could be used to invest in plant, machinery, buildings and ultimately to create jobs. Companies must also brace themselves ahead of two other key tax changes. First, two capital allowances, the super-deduction and annual investment allowance of £1m, both come to an end in March 2023. Second, the main rate of Corporation Tax rises to 25% (also in March 2023).

All of these forthcoming changes leave businesses with very little time to plan for their long-term growth or to take advantage of existing tax reliefs. The suspension of the NI rise is the most pressing action the Chancellor needs to take. It is vital to ensure that funds are invested in plant, machinery and buildings, which will in turn safeguard and create jobs. However, Rishi Sunak also needs to go further. He should announce long-term incentives to support manufacturing businesses to invest and plan for the future. One way he could do this would be to extend the super-deduction to allow for longer term planning.

Long-term reliefs are also absolutely necessary for businesses to pursue programmes towards decarbonisation and net zero, especially as the UK commits to reducing its greenhouse gas emissions by 2050. A widening of tax incentives for energy efficient assets are crucial, especially for SMEs who usually struggle to stay ahead of the curve when it comes to reducing emissions. Ultimately, the sector is crucial to the country’s post-Covid-19 recovery and in a world of post-Brexit opportunity, so supporting it should be a priority for the UK government.

 

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