Pushing For Incentives To Encourage Investment

Investment is the key issue for UK manufacturing according to the Engineering and Machinery Alliance (EAMA), of which Picon is a founder member, in its budget submission to the UK Chancellor.

Investment is the key issue for UK manufacturing according to the Engineering and Machinery Alliance (EAMA), of which Picon is a founder member, in its budget submission to the UK Chancellor of the Exchequer.

Manufacturing investment performance since 1998 has been poor, declining each year for five straight years.

Last year's pick-up as indicated by EAMA's members is now fragile, said Picon.

Companies are waiting for indicators such as a lead from Government or a new business win before deciding whether to go ahead with their next stage of investment (plant, staffing, IT and training).

John Brazier, the chief executive of Picon said: "With the budget due on March 16, probably shortly before the General Election, EAMA recommends some relatively small changes for the oversized effect they could have on investment confidence, while costing the Treasury very little." All three measures could be put in place easily, without a Finance Act.

By acting on them quickly, Government would demonstrate its commitment to manufacturing, he added.

The first recommended measure would be no tax increase on manufacturing business.

According to Picon, manufacturers in the printing industry are already facing significant increases in raw material and energy costs, which they will not be able to recoup in internationally competitive export markets.

Margins and cash flow will therefore suffer, while Government revenues from North Sea oil and gas and VAT will increase anyway.

Secondly, there is a call for a two per cent reduction in Insurance Premium Tax (IPT) for manufacturing companies employing less than 50 people under the relevant SIC codes that the insurance companies use to base their premium rates on.

The tax could be levied directly as now, but at the reduced rate.

Employers Liability Insurance, which is mandatory, is more expensive for manufacturing companies than for others, not least because manufacturing companies' activities require cover that other firms don't need to the same degree (for instance, engineering cover for mechanical and electrical breakdown).

The EAMA view is that it is inappropriate for the Exchequer to exacerbate the inflationary impact of increased premiums through IPT (manufacturers margins are still typically 10 per cent, or lower) commented Picon.

Thirdly, EAMA also called for an extension of the 50 per cent tax allowance for SMEs' investment for an extra two years (2005-2007) and that to ensure that it is well publicised, relevant organisations and trade associations should be used to promote it to their members.

Research showed that only very small numbers of eligible companies are aware of the support to which they are entitled, claimed Picon.

Over the longer term, EAMA recommends further action to stimulate investment, exporting and training, while cutting out unnecessary regulations.

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