March 19, 2014 2:31 pm

Budget 2014: UK manufacturers hail boost for business

HMS Illustrious Refit At Babcock Dockyard©Bloomberg

Britain’s manufacturers were delighted to find themselves among the biggest beneficiaries of a Budget aimed at bolstering exports, investment, regional development and skills.

George Osborne said investment and exports were up “but Britain’s got 20 years of catching up to do”. He said it was a Budget for “makers” and “doers” as well as savers.

Business and export growth, confidence

Terry Scuoler, chief executive of EEF, the manufacturers’ organisation, said: “The chancellor said this would be a Budget for manufacturers and he has delivered on his word.”

His sentiments were echoed by John Cridland, director-general of the CBI employers’ group, who said the Budget “will put wind in the sails of business investment, especially for manufacturers”.

He added: “This was a make-or-break budget coming at a critical time in the recovery and the chancellor has focused his firepower on areas that have the potential to lock in growth.”

The chancellor cut bills for manufacturers in a package the Treasury estimates will save a cumulative £7bn across the economy in lower energy costs by 2018-19.

He froze the carbon price floor – a tax on electricity generated from fossil fuels – for the rest of the decade, which would save a midsized manufacturer almost £50,000 on its annual energy bill.

He also extended a compensation scheme for energy-intensive industries such as steel, chemicals and paper for a further four years and gave extra help worth almost £1bn to protect them from the cost of other green levies.

Mr Osborne said: “Half of the firms that will benefit most are in the north of England. A third are in Scotland and Wales.”

Mr Scuoler said building blocks were now in place that would help rebalance the UK economy. “But, as the chancellor suggests, there is still more work to be done. We now need to take steps that will lead to longer term solutions beyond current spending and electoral cycles.”

For all businesses, Mr Osborne said the annual investment allowance against corporation tax would be doubled to £500,000 and extended to the end of 2015, ensuring 99 per cent of companies paid no tax on money used for capital spending. This policy would cost £2bn, he said.

In depth

UK Budget 2014

UK budget in depth

George Osborne’s fifth Budget seeks to help ‘hard working’ families and offers a big package to help savers

Mr Osborne also said he would double the amount of lending available under an export finance scheme to £3bn and cut the rate of interest on it by a third.

The Office for Budget Responsibility raised its forecast for business investment growth this year to 8 per cent, after a 1.2 per cent decline in 2013.

However, it expects exports to grow by only 2.6 per cent this year and by an annual average of below 5 per cent from 2015 – less than half the rate needed to reach the chancellor’s target of doubling exports by 2020.

Other measures included an increase in the rate of the research and development tax credit for lossmaking small businesses from 11 per cent to 14.5 per cent.

Mr Osborne said he would make permanent the Seed Enterprise Investment Scheme, a tax break that helps to finance start-ups.

The British Chambers of Commerce welcomed an expansion of apprenticeship grants to support more than 100,000 new work placements for young people at a cost of £85m a year for the next two years.

“Osborne’s focus on investment, exports, housebuilding and economic resilience passes the business test,” said John Longworth, BCC director-general.

“As with any Budget, there were some populist measures that were not at the top of business’s wish list. Luckily, these were far outweighed by considered measures to support business growth and wealth creation.”

John Allan, national chairman of the Federation of Small Businesses, said Mr Osborne had delivered a budget to maintain positive momentum in the economy, while incorporating fiscal prudence.

“The chancellor set the pace towards some progress but there is still more to be done to get the economy and public finances back on track,” he added.

Simon Walker, director-general of the Institute of Directors, said the Budget was “responsible and imaginative” and would promote growth, exports and investment.

However, while he supported the increase in the income tax personal allowance, he was “disappointed that more and more workers will be dragged into the 40 per cent income tax band, as the chancellor has failed to raise the higher rate tax threshold by any meaningful amount”.

Phil Orford, chief executive of the Forum of Private Business, said it was a Budget “that offers some help to all levels of business, with perhaps a slight focus on the midsize, energy-intensive and manufacturing businesses, rather than the very small ones”.

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