Comment: Mini-Budget offers industry relief but uncertainty remains
Nick Barrett, Editor
nick@maintenanceandengineering.com
@MaintOnLine
Manufacturers who have been under stress about the threat of wildly escalating energy prices were able to breathe a sigh of relief – at least temporarily – in September when plans to hand discounts to businesses were welcomed by the sector.
Ahead of a ‘mini-Budget’ on 23 September, the government announced an Energy Bill Relief Scheme – to be funded by extensive additional borrowing – which will cap wholesale electricity and gas prices for businesses at less than half the level anticipated this winter.
The measure includes the removal of green levies paid by firms receiving support under the scheme, and will last for an initial period of six months.
Further announcements at the mini-Budget, which saw Chancellor Kwasi Kwarteng (pictured) reveal a new Growth Plan’, included maintaining corporation tax at 19% and making 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.
The Chancellor’s statement was delivered to a muted response from Conservative back-benchers, but has been broadly welcomed by industry groups including Make UK in light of the current challenges facing manufacturers.
Earlier in the month, a survey by the group had revealed that almost six in 10 firms felt increasing energy costs to be ‘business threatening’, while 13% were reducing their hours of operation or avoiding production during peak periods, and a similar proportion had already made job cuts.
Manufacturers said that if bills went on to increase by over 50%, more drastic action such as shutdowns and redundancies would become inevitable. This led Make UK to call for a “shock and awe” budget to prevent permanent economic scarring.
So did the Chancellor deliver? The group’s CEO Stephen Phipson said industry would embrace the Chancellor’s statement which, “coming on the back of the support for energy, contains a number of positive measures to help shield viable companies from the worst impact of escalating costs and help protect jobs”.
However he also noted that the announcement marked the sixth growth plan in little over a decade. “This has resulted in zero certainty for business, the most important thing it needs. Government must try and reverse this process by working with industry to develop a long-term economic strategy together with a National Manufacturing Plan.”
This, he continued, must include “a properly designed tax system and a certainty of policy” that aims to boost business investment, develops the workforce of the future and equip people with critical digital skills.
Mixed reviews to say the least. Some have also expressed concern that the likely impact of the Chancellor’s measures are not yet fully understood, due in part to government’s refusal to publish a forecast of the UK’s economic outlook alongside the mini-Budget.
Chair of the Treasury Committee Mel Stride wrote to the Chancellor ahead of his statement with a warning that to bring in significant tax cuts without such a forecast would be ill advised. She suggested that doing so would be tantamount to “flying blind”.
In response, Mr Kwarteng emphasised that although no forecast would come with the mini-Budget, the government remains committed to two forecasts in this fiscal year, as required by legislation.
At least in the short term then, it seems the Chancellor’s rescue package should help the manufacturing sector to weather the storm of energy price hikes and prevent damage to productivity. The longer term consequences of his decisions will only become apparent later.
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