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12 May, 2021

Super-deduction tax spurs manufacturers’ spending plans

06 April, 2021

Almost a quarter (22.6%) of UK manufacturers are planning to boost their investments as a direct response to the “super-deduction” tax that chancellor Rishi Sunak announced in his recent Budget, with more than a quarter (28.1%) more saying they will bring forward their investment plans. But, according to a new survey by the manufacturers’ organisation, Make UK, just under half of companies (48.6%) do not expect to make any changes to their investment plans as a result of the new tax, or say that their plans are too rigid to change.

The super-deduction tax relief, announced in the Spring 2021 budget, works alongside the Annual Investment Allowance to provide 130% relief to eligible investments in plant and machinery. According to the Make UK survey of 149 manufacturers – published in a new Manufacturing Monitor – almost a third (32.4%) regard the tax relief as the Budget measure that will have the biggest impact on their businesses, followed by the decisions to extend the furlough scheme (23.2%) and to boost r&d (21.2%).

The Budget has raised confidence for 19.6% of UK manufacturers, with just 3.4% of those surveyed viewing it negatively. The boost was especially marked among mid-size (41.7%) and larger (42.9%) companies.

The survey also shows that the planned increase in corporation tax has largely been accepted by manufacturers, with 55.3% saying it will have no impact on their investment plans. More than a quarter (28.4%) think it will deter foreign investment in the UK, while 16.4% say it will have a negative impact on their companies’ investment plans.

Conditions for the manufacturing sector are continuing to improve with almost half of companies (46.9%) reporting that sales and orders have improved since the start of 2021 – and 15.6% saying they are worse.

Manufacturers still expect recovery to take a while, with more than a quarter (28.1%) believing it will take more than a year for them to return to normal trading, and 26% expecting normal trading to resume within 6–12 months.

Some 40% of UK manufacturers say that they are not using the government’s furlough scheme to support wages. One in ten companies still have up to 25% of their staff furloughed, with almost half of companies (44.6%) having up to 10% of their staff on furlough.

Make UK is warning that, given the UK's record of poor performance on investment, there is a need for a longer-term, broad-ranging industrial strategy that will put manufacturing at the heart of the government’s plans to recover from the Covid-19 pandemic. This should encompass a partnership between government, industry and the UK’s science base to boost innovation and investment performance.

Make UK has reported the new survey findings in its latest Manufacturing Monitor

“The Budget has made a clear impact on manufacturers in terms of confidence, and they are set to step up their plans to invest in response,” says Verity Davidge, Make UK’s director of policy. “For too long, the UK’s investment performance has been below par and the incentive should provide a boost in the short-term at least.

“However, one swallow doesn’t make a summer and, with the economy at a crossroads, there remains an urgent need to consider how we make a structural change to investment for the long term,” she adds. “This must be done in the round of an industrial strategy that looks beyond the horizon, plays to the UK’s undoubted strengths in science and innovation, and seeks to truly ‘build back better’.”




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