Budget must give firms quick and easy access to tax
incentives
Key findings:
-
37% of companies will increase investment in response
to the Industrial Strategy
-
Decarbonisation, AI and digital technologies to be main
focus of investments
-
Almost 4 in 10 companies make investment decisions
based on the availability of incentives
-
But, investment intensity the lowest since the EU
Referendum
-
Confidence in domestic demand the biggest driver of
investment, while frequent changes to tax policy cited as one
of the biggest barriers
The announcement of a long term industrial strategy is set to
bring immediate benefits to the UK economy, with more than a
third of companies saying they will now accelerate investment
projects as a direct result of the announcement according to a
major annual survey on investment priorities published today by
Make UK and RSM UK.
However, Make UK and RSM UK are urging the Government to use the
forthcoming Budget to not just safeguard vital investment
incentives which the survey shows are key drivers of
manufacturers' investment decisions but, to extend them further.
According to the survey, almost four in ten companies (37%) make
their investment decisions based on the availability of tax
reliefs.
This call coincides with findings that investment intensity in
manufacturing dropped to its lowest level last year since the
immediate aftermath of the EU Referendum in 2016.
Fhaheen Khan, Senior Economist at Make UK, said:
“Manufacturers have long called for an industrial strategy and
it's clear that this is set to bring immediate benefits in terms
of accelerating investment projects. However, it's clear that
we're at a critical juncture for investment, and there is a real
sense of urgency. The forthcoming Budget must not only safeguard
current incentives but, refine them with a set of carefully
targeted measures to focus on boosting the take up of
accelerating technologies and innovation. Furthermore, the
statement should end the frequent tax changes to incentives we
have seen in recent years by committing to a business tax regime
which is set in stone for the lifetime of this Parliament.
, head of manufacturing at RSM
UK, added:
“Despite headwinds, UK manufacturers remain optimistic, but to
allow them to transform, invest and drive future prosperity they
need a helping hand from the government, not more taxes.
Simplification is key here. We know tax reliefs influence
investment decisions, so the chancellor has a real opportunity to
make them more accessible and easier to claim in the forthcoming
budget. This will not only boost investment but drive innovation,
improve productivity and accelerate economic growth through
industry.”
As well as analysing the impact of Government policy, the survey
also provides a comprehensive view of investment trends across UK
manufacturing.
The announcement of an industrial strategy is being specifically
used to drive investment in decarbonisation by more than 4 in 10
companies (43.%). Investment in data analytics and AI (35.4%) and
increased manufacturing capacity (34.2%) are a priority for
around a third of companies.
Skills has overtaken plant and machinery as the leading general
investment priority in the next twelve months (47.6% and 44.1%
respectively). Amid the ongoing debate about the investment
performance of UK industry compared to international competitors,
almost two thirds of companies (68%) invest up to 10% of their
turnover in plant and machinery, with a further fifth (18%)
investing between 10% and 50%.
However, investment intensity (investment as a percentage of
turnover) is now the lowest since 2017 at 6.8%, down
significantly from last year when it reached a ten-year high of
8.1%.
Furthermore, more than two thirds of companies (68%) invest up to
10% of turnover in R&D, while almost one in five (18%) invest
between 10% and 50%. R&D intensity has also fallen slightly
to 6.2% from 6.5% last year.
The survey of 170 companies was conducted between 23 July and 21
August.
