Budget has ‘left mission for growth stuck in neutral’

Last week's Budget was undoubtedly a hire wire act given the difficult economic circumstances the Chancellor faced, as well as the intense speculation in the run up. As the dust has begun to settle, it is fair to say that Rachel Reeves has received some positive support from industry, although maybe in the eyes of some it is seen as a case of ‘two steps forward one step back for manufacturers’.

Rain Newton-Smith, the CBI’s CEO, said: “The Government’s growth mission is currently stalled. While the Chancellor has succeeded in creating the fiscal headroom she needed, a scattergun approach to tax risks leaving the economy stuck in neutral. Adding national insurance to salary sacrifice pension contributions curtails savings and pushes up the cost of employment. Coming on top of the rise to the National Living Wage, increased employment costs make it even more expensive for employers to offer jobs to young people and jobseekers.

“However, the Government should be commended for protecting capital spending, boosting innovation, sticking with the corporate tax roadmap, and hiring the planning officers business asked for. But business will still rue a missed opportunity to be bold and press on with much needed tax reform, simplification and alignment of incentives to catalyse business investment and job creation.

A focus on economic growth
She continued: “With business investment and profitability weaker as a result of these decisions, the Government must now double-down on leveraging the experience and expertise of enterprise to find the step-change in economic growth that has proven elusive.”

Make UK’s CEO Stephen Phipson (pictured left) said: “On the upside, companies will welcome the decision to expand capital allowances for leased equipment and greater investment in apprenticeships for SMEs. Funding for skills, business support and infrastructure, targeted at the Regional Mayors, will also help support growth.

“The Chancellor should also be commended for her personal intervention to kickstart the consultation on the business energy support scheme which is vital if we are to address the UK’s eye watering and uncompetitive industrial energy prices. On the downside, however, restricting tax relief on salary sacrifice and, a further increase in the National Living Wage mean that manufacturers are again facing greater barriers to successful recruitment and retention of skilled staff. The electric vehicle (EV) road tax will also potentially hinder their adoption and damage an automotive sector already facing a challenge to meet its EV targets.”

He added: “The Government came to power promising that growth was going to be its number one mission and, while it was dealt poor cards, we have yet to see any significant upswing in our economic performance and productivity. It is the private sector that will provide this growth and create high value, high skill jobs and, while the industrial strategy was a major signal of intent, we need to see a much stronger focus on delivery.”

Pillar of national strategic importance
Mike Hawes, the SMMT’s CEO, said: “The Government has recognised the automotive industry as a pillar of national strategic importance, backing it with an industrial strategy and additional £1.5 billion to drive competitiveness and investment. Deferring the end of employee car ownership schemes into the next Parliament, meanwhile, will be welcomed by workers across the sector.

“Changes to the VED expensive car supplement are welcome, as is the additional £1.3 billion funding for the Electric Car Grant and support for charging infrastructure. These will help, but will not offset the impact of introducing a new Electric-Vehicle Excise Duty – the wrong measure at the wrong time.

“Manufacturers have invested to bring more than 150 EV models to market. However, the pressure to deliver the world’s most ambitious zero emission vehicle sales targets – whilst maintaining industry viability – is intense. With even the OBR warning this new tax will undermine demand, government must work with industry to reduce the cost of compliance and protect the UK’s investment appeal.”

Graham Corfield (pictured right), CEO of Telford-based Aviramp, whose award-winning step-free boarding ramps are in use at more than 900 airports worldwide, said the Chancellor had not taken the action needed to drive business growth. He added: “By raising taxes the Chancellor is taking more money out of the economy. You cannot tax your way to growth however much you try to disguise new measures to raise revenue. The only way to get our economy firing on all cylinders again is to give the business community the freedom to start creating wealth and the confidence to invest in the future.

“That means stripping away the red tape and bureaucracy which stifles innovation, creating the conditions where business can invest with confidence knowing we won’t be taxed just for being successful and investing in skills and training so we can really seize the digital future.

Skills crisis
Pinaki Banerjee, PP Control & Automation’s CEO, one of the UK’s leading manufacturing outsourcing specialists, said: Overall, last week’s Budget delivered welcome signals for UK manufacturing through long-term investment, sector-specific backing and commitments on energy and specifically, apprenticeships. However, let us not get carried away. There are still significant concerns around productivity, with very little in there to encourage investment in automation and technology and, apart from the encouraging news on funding for under 25 apprentices, a skills crisis that hasn’t really been fully addressed.

“In fact, the deeper you investigate the announcements, many of the key policies give a little bit with one hand but then take away with another. For example, a strong commitment to nuclear is welcome, yet there was little additional clarity on timelines for grid reform, hydrogen rollout, CCS clusters or renewable supply-chain commitments. Devolution and more regional funding can boost ecosystems and local supply chains, yet more details on the much vaunted Industrial Strategy and its implementation was glaringly missing from the speech.”

Leading UK additive manufacturer AMufacture also stressed the Budget could have gone much further in supporting innovation in UK industry. The Portsmouth-based firm says it welcomed the move to cut energy bills for 7,000 businesses in high-growth industries and a new five-year plan by the British Business Bank to invest larger amounts in successful domestic scale-ups.

But company founders Craig Pyser and Will Howden said the moves were set against a backdrop of depressed business confidence and rising taxes which were putting the brakes on growth. They added: “We are pleased to see some help for business around the huge cost of energy, which continues to make it more difficult for UK companies like ours to compete on a global stage. It is also good to see the Government making access to finance easier for our brilliant entrepreneurs.

“But the general economic outlook remains flat and confidence among the business community extremely fragile. Today’s Budget will not change that in the long-term because extra taxes simply take more money out of circulation meaning it is not available for investment. We would have liked to see more action to cut some of the red tape around business, particularly when it comes to exports, and moves to reduce the cost of actually employing people.”