Long term thinking urged as Autumn Statement disappoints

Nick Barrett, Editor
nick@maintenanceandengineering.com
@MaintOnLine

Let’s try this again. In the last issue of Maintenance & Engineering, we highlighted response to the mini Budget, which with its temporary cap on energy prices for businesses and cancellation of a planned rise in corporation tax was broadly welcomed by manufacturers.

A key message coming from industry was the need for stability. After all, the then Chancellor Kwasi Kwarteng’s Growth Plan was the sixth such document to be released in little over a decade.

While inflation was and still remains the immediate challenge facing businesses, manufacturing firms wanted certainty of policy in order to confidently plan for the future. Unfortunately this was not to be.

Three weeks after his mini-Budget speech to Parliament and just five since his appointment as Chancellor – Kwasi Kwarteng was sacked, with the new Chancellor Jeremy Hunt taking his place. The Prime Minister didn’t last much longer as Liz Truss was replaced by Rishi Sunak at the end of October.

In the aftermath, almost all of the tax measures set out in the Growth Plan that had not been legislated for in Parliament were reversed, including the plan to scrap an increase in corporation tax, which would have seen it remain at 19%. Instead, it will rise to 25% in April.

More positively, the six month Energy Bill Relief Scheme remains in place for businesses and will be reviewed before the end of the year to decide whether support should extend beyond March 2023.

A plan to make permanent the £1 million level of the Annual Investment Allowance – giving 100% tax relief on investment in qualifying plant and machinery up to this level of spending – has also survived the cull.

There was a limited amount of further support for businesses in the Chancellor’s Autumn Statement delivered in the middle of November.

Mr Hunt promised support on business rates bills which are due to change in April to reflect a reassessment of property values. He said large bill increases would be capped and announced a freeze on the business rates multiplier for another year to protect firms from rising inflation.

The Chancellor also committed to increase public funding for research and development to £20 billion in 2024-25, and specifically for manufacturers – said the Made Smarter Adoption programme which helps smaller firms boost productivity through digital technology will be expanded to cover the East Midlands. It currently focuses on the North East, North West, Yorkshire & the Humber and West Midlands regions.

However there was no commitment to extend the Super Deduction scheme – which allows companies to claim a 130% first year capital allowance on qualifying plant and machinery investments – beyond the end of March despite calls from industry.

So what was the verdict this time? The Confederation of British Industry’s chief economist Rain Newton-Smith said the main test for the Autumn Statement “was to deliver stability at the same time as unveiling a clear plan for growth”.

The Chancellor, he felt, deserves credit for delivering on the former, and the freeze in business rates was particularly welcome. “But businesses will think there’s more to be done on growth,” he said. “Firms will also need more detail on what happens with the business energy support scheme in the coming weeks.”

Manufacturing group Make UK’s chief executive Stephen Phipson was similarly balanced in his view of the Chancellor’s statement. He said: “Economic and political stability is the spine of our economy. The Chancellor has recognised this and taken action which is welcome.”

However he warned that while energy support for businesses has been welcome, “the apparent decision to end support next April when prices are likely to remain high for much longer is troubling”.

He added: “There remains an absence of an overarching plan for how the big drivers of growth such as skills, innovation and science are brought together. This is essential if we are to improve productivity, take advantage of the UK’s undoubted strengths in its academic base and boost growth across all areas of the UK.”

Securing future skills is a particular concern for many in manufacturing and engineering. The Autumn Statement did little to immediately address the industry’s labour crisis, but it did announce the appointment of an adviser on skills reform – Sir Michael Barber – who will take forward the delivery of T-Levels and approval of Higher Technical Qualifications.

“The engineering and technology sector is crying out for more skilled people,” said Engineering UK’s chief executive Hilary Leevers. “We would welcome a broader look at the education system and hope Government will work with stakeholders to develop a STEM skills strategy and identify any further reforms needed to ensure that we have an education system able to deliver on the UK’s ambitions.”

Industry’s response to the Chancellor’s statement shows fears over energy prices are clearly still front of mind for manufacturers who will be hoping for an announcement on further support sooner rather than later.

Beyond this, firms are desperate for certainty and would welcome a long term vision from Government that aims to promote investment and equip the sector for the future. Will they get one? That, like much else at the moment, remains uncertain.