Budget 2014: Manufacturers welcome £7bn support package

MANUFACTURERS have congratulated the Chancellor for delivering on his promise and creating a package of measures designed to cut costs and boost output.

Mr Osborne said if the UK manufacturing sector was to be sustained then it should look to the United States for inspiration, where energy costs are half what they are in the UK.

Last month manufacturers called on the Chancellor to use the Budget to combat rising industrial energy prices, amidst fears that escalating prices were potentially diverting investment and threatening growth.

TheBusinessDesk.com’s Budget coverage is brought to you in conjunction with EY. To read more click here.    

Mr Osborne said he would be doing his best to support the industry by implementing a package of measures designed to save £7bn.

He announced he would be capping the Carbon Price Support rate at £18 per ton of CO2 from 2016-17 for the rest of the decade.

This, he said, would save a mid-sized manufacturer almost £50,000 on their annual energy bill.

Secondly, he agreed to extend the existing compensation scheme for energy intensive industries for a further four years to 2019-20.

“Our steel makers, chemical plants, paper mills and other heavy energy users make up 35% of our manufacturing exports and employ half a million people. This scheme helps the companies most at risk of leaving to remain in the UK,” he said.

Thirdly, he introduced new compensation worth almost a billion pounds to protect energy intensive manufacturers from the rising costs of the Renewable Obligation and the Feed-In Tariffs.

Otherwise, he said, green levies and taxes would make up over a third of their energy bills by the end of the decade.

He also exempted from the carbon price floor the electricity from Combined Heat and Power plants which are used by hundreds of manufacturers.

In response, 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. The Government clearly recognises the need to make the competitiveness of the UK a priority. We argued strongly for the need to reduce the rising cost of energy faced by many companies, and he’s acted on that. Taken together with measures to boost investment, exports and skills, the Chancellor deserves a pat on the back. We have always said that to achieve a resilient recovery Government must back manufacturing and we’ve seen that from this Budget.

“We now have some of the building blocks in place which will help rebalance the economy. But, as the Chancellor suggests, there’s still more work to be done. We now need to take steps which will lead to longer term solutions beyond current spending and electoral cycles. This will finally give business the predictability and certainty to encourage the successive rounds of investment our economy needs.”
 
Andrew Spence, EY’s tax partner in the Midlands, said: “Having paid some of the price for reducing the corporate tax rate, manufacturers and heavy industry were given a welcome fillip today as George Osborne returned to a firm favourite of Chancellors past. Extending and doubling the Annual Investment Allowance to £500,000 provides immediate tax relief for investment. Costing over £1.5 billion in the first five years, this cash bonus should provide just the incentive business needs.

“In a further copycat measure, the Chancellor extended the Enterprise Zones reliefs on Business Rates and Enhanced Capital Allowances. More fundamentally, the Chancellor’s limits on the carbon price floor will deliver an overall tax package of almost £3.5 billion.”

“Osborne talked of the need to ‘out-compete, out-smart and out-do’ our competition. He will now be looking for manufacturers to out-perform.”

To encourage exports, the Chancellor announced he would double the amount of lending available through export finance to £3bn.

He also said that from today, the interest rates charged on that lending would be cut by a third.

“Instead of having the least competitive export finance in Europe, we will have the most competitive,” he said.