News - Published 21st November 2016

UK Manufacturing Autumn Statement 2016 Predictions

Menzies Autumn statement 2016 response

Small and medium-sized manufacturers need tax changes that provide continuity and encourage long-term planning and investment. In the current climate of Brexit uncertainty and currency fluctuations, UK-based manufacturers need certainty and support above all else from this year’s Autumn Statement.

Caroline Milton - Menzies AccountantIn particular, Chancellor Philip Hammond has an opportunity to introduce fiscal measures to incentivise international corporate investment in the UK, while also encouraging home-grown businesses to invest in capital, innovation, skills and business growth.

The Chancellor has an opportunity to launch a far-reaching investment manifesto for the UK, backed up by tax legislation that will attract multinationals and provide more support to innovation-led manufacturers. This manifesto needs to encompass core areas such as incentivising R&D, attracting inward investment and encouraging investment in training and skills development.

SME manufacturers will be hoping that continued commitment is shown to reducing the headline rate of Corporation Tax. Bringing forward the planned reductions would send a reassuring message to international manufacturers. In particular, a decision to cut Corporation Tax to 17%, or even lower, with immediate effect would encourage them to continue investing in the UK market and compensate them for the increased import costs they are experiencing currently due to recent falls in the value of the pound.

Instead of making minor adjustments, manufacturers would prefer the Chancellor to concentrate on scoping out a long-term vision for the UK tax system that takes into account Brexit.

1 – Annual Investment Allowance (AIA)

There were no changes in this year’s Budget, but any move to increase the AIA above the current level of £250,000 would help to encourage manufacturers to invest in capital assets and facilitate growth. Setting out a three or five-year plan for AIA increases would also allow businesses to plan for the long term.

2 – R&D tax relief and Patent Box

There is an opportunity to put in place a plan for incentivising innovation to be introduced post-Brexit, once EU State Aid restrictions are removed. The R&D tax relief scheme could be extended to provide further encouragement to innovation-led businesses. Simplifying and extending the Patent Box regime could also help to attract international investment.

3 – Apprenticeship Levy

Due to be introduced in April 2017, the Apprenticeship Levy is more limited in scope than it needs to be. Instead of just creating a fund to support the creation of openings for apprentices, it could be extended to encourage more investment in training and skills development generally. Taking this approach could help manufacturers to address current STEM skills shortages and prepare for a future which may exclude access to low-cost EU workers.

4 – Free trade zones

As well as doing some of the above, the Chancellor should consider ways to mitigate the impact of reduced EU investment in the UK post-Brexit, whilst also boosting Britain’s attractiveness to growing businesses.
Caroline Milton said: “The Chancellor can afford to be creative about ways to support innovative companies in the future. For example, a version of the free trade zones established in regions such as Dubai and Shanghai could be replicated here in parts of the country that most need inward investment. These zones could offer SME manufacturers a favourable tax environment in which to grow.

Caroline Milton is a member of Menzies Manufacturing Sector team. Find out more about the Menzies Manufacturing sector services.

Get more input on the 2016 Autumn Statement implications for the Manufacturing sector by speaking to our sector team.

Posted in News, Manufacturing