View profile

🗝 How to unlock investment to kickstart growth

Manufacturing Mondays
Manufacturing Mondays
It’s National Manufacturing Day this week! We can’t wait to celebrate on Thursday - with literally hundreds of companies involved and tens of visits planned, it’s gearing up to be a fantastic day.
So, stay up to date and follow the action #NMD2022
But before we get to Thursday, we have the prospect of a pre-Autumn Budget intervention on the cards. The details remain unclear but what we do want to see is a decision on the UK’s Capital Allowance regime. Stimulating investment is a surefire way to help restart growth, but we need to set the right conditions to enable that.
We run through the options and what we think HMT should consider in this week’s Manufacturing Monday.
Happy Monday!

The UK’s capital allowance regime
⬆ The UK manufacturing sector accounted for approximately 17% of all investment in capital in 2021, which means the sector makes the largest relative contribution to investment in assets across different UK sectors.
Furthermore, it mainly invests in high-value plant, machinery, and other assets therefore, we were encouraged by the Treasury’s approach to reviewing the capital allowances regime to set in place the right incentives to not only boost investment in capital but also productivity.
For manufacturers, capital allowances allow businesses to deduct the cost of qualifying capital expenditures from taxable profits annually, normally in line with depreciation.
💷 This system extends itself as a form of cashflow management for manufacturers investing in capital and reduces the burden of the total cost of that investment spread over a few years.
In times when liquidity is scarce, capital allowances are an important tool for manufacturers, particularly SMEs, to manage cashflow and reduce the risks associated with larger-scale investments. Cashflow is the lifeblood of manufacturing and is the main source of finance for investment. Although businesses do access external finance, when necessary, our data shows SMEs overwhelmingly (67%) prefer to re-invest past profits into their business. 
🚧 But we find several challenges with the current system, and we hope HMT consider acting upon these in its review:
  1. Loss-making: Businesses that make no profit are unable to utilise capital allowances to reduce the cost of investment. Therefore, if a large investment in one year could lead to a loss in the short term then this could exclude manufacturers from benefitting from the scheme entirely without clear backdating principles in place.
  2. Lack of consistency: Manufacturers have highlighted that regularly changing aspects of the current regime and raising/lowering the thresholds itself acts as a disincentive to invest. Regularly changing the AIA threshold dampens confidence in the policy with businesses unable to understand when it would be right to invest.
  3. Lack of Longevity: Manufacturers in the UK typically have investment planning cycles between five to ten years, and so to address the challenge of systemic underinvestment in the industry, policy measures must be introduced that are at least commensurate in their time frame
An intervention before Autumn Budget?
Any pre-Autumn Budget announcement is likely to focus on households rather than businesses, but that doesn’t rule out the scope for possible support for businesses.
To create the right business environment to invest we are calling for:
  • Enabling Full Expensing for up to one/two years (short-term). This should be on similar terms as the AIA and cover leased and rented capital.
  • Following the end of Full Expensing, make permanent the £1m threshold for the Annual Investment Allowance (AIA) (long term) and work towards simplyfing the system to ease access. 
Making the case on #NMD2022
National Manufacturing Day is this Thursday and we’ll be shouting loud and clear about the ways to kickstart investment and growth (including the ones above). Growing the footprint of the manufacturing sector can add £142bn to our economy, but crucially help protect and create jobs, support local communities and help us tackle those big societal issues.
ICYMI… We made the case earlier this year in our Levelling Up: Bridging the gap between policy and progress.
Make UK: Levelling Up, Bridging the gap between policy and progress
Make UK: Levelling Up, Bridging the gap between policy and progress
So on Thursday look out for our 5-point plan of how to grow the sector, and what more Government can do to support on National Manufacturing Day.
Out and about
The Make UK team were out and about this week, attending pre-National Manufacturing Day events, conferences and many more. Here is a flavour of where we’ve been over the last week.
Head of Make Modular, Steve Cole was at the CIH Housing Conference up in Manchester sharing directly with the new Housing Minister, Stuart Andrew, how Make UK Modular members are creating next-generation green, skilled jobs, and leading the way in levelling up and building back greener.
Steve K Cole
Great to meet @StuartAndrew and briefly chat all things modular. Look forward to welcoming you at one of our members factories soon #Housing2022 #greenerbetterfaster
Make UK CEO Stephen Phipson, and our new Chair, Lord Hutton, were in Bristol, at the National Composite Centre speaking to the HVMC CEO Katherine Bennett, on the crucial role of catapult as we move to our digital and green future.
Katherine Bennett CBE
In the run up @MakeUK_ @MakeUKCampaigns National Manufacturing Day #NMD we were happy to host Lord Hutton and Stephen Phipson at @NCCUKinfo yesterday @HVM_Catapult
#NMD2022 is here!
It’s here! Yes, that’s right on Thursday we’ll be celebrating National Manufacturing Day! Manufacturers across the country will be opening their doors to students, local communities, even MPs - to showcase what modern manufacturing really is.
There is still time to get involved…
Ps. If you are a Government Department, you can also get involved too😉
We 💚 policy and manufacturing, so let’s talk:
📱 Twitter
📧 Email
💬 LinkedIn
🔗 Linktr
Copy editor: Bhavina Bharkhada, Make UK Head of Policy & Campaigns
Did you enjoy this issue? Yes No
Manufacturing Mondays
Manufacturing Mondays @MakeUKCampaigns

We discuss the big issues impacting the UK manufacturing sector, and our policy ideas to overcome them.

In order to unsubscribe, click here.
If you were forwarded this newsletter and you like it, you can subscribe here.
Created with Revue by Twitter.
Broadway House, Tothill Street, London, SW1H 9NQ