Autumn Statement 2023 - How will it affect UK manufacturing?

Autumn Statement 2023 - How will it affect UK manufacturing?

There was a significant focus on the manufacturing sector in the Autumn Statement with measures announced to stimulate investment and growth. Many have been asking for the Government to provide targeted support to this key sector of the economy so it was great to see the Government finally do this. 

Investments in growth and development for manufacturing

As the eighth largest manufacturing sector in the world, it was reassuring to hear the government’s confirmation that they are committed to attracting foreign investment into the UK. Lord Harrington’s review of foreign direct investment highlighted that the UK advanced manufacturing industry is a key sector for investment, and could stand to benefit from an emphasis on regional growth and a concierge service to facilitate larger investments in the sector. The agreement, however, is only to the headline recommendations and we await further details of how this will benefit the sector. 

£4.5bn of direct investment in strategic sectors including automotive and aerospace demonstrates the government's focus on the manufacture and supply chains of zero emissions vehicles and aircraft. With some of the investment allocated to the Made Smarter programme, this should allow manufacturing SMEs across the country to benefit from advanced technologies to improve productivity and reduce carbon emissions.   

Plugging the skills gap and labour shortages 

Many announcements also sought to address shortcomings in the supply of labour which is a common issue across the manufacturing space. A £50m pilot to provide apprenticeships in growth sectors could help to bridge the skills gap and to smooth the adoption of beneficial technologies, while measures to encourage people back into the workforce may also help to reintroduce their experience and knowledge. The sector had made calls for the government to go further, asking for full review of the apprenticeship levy as well as tax reliefs and incentive payments for taking on apprentices and the investing in training. 

Capital investments and streamlining R&D tax credits

The UK manufacturing industry has asked for greater forward-looking certainty for capital allowances for some time. Some of this was given previously when the £1m Annual Investment Allowance was made permanent, however the announcement of “full expensing” relief for investments in capital assets will be welcomed across the sector. This predictability will give businesses greater comfort as they make long term investment decisions in new technologies to improve productivity. 

Yet again, alcohol duties have been frozen which will be welcome by those in the Food and Drink sub-sector whose products continue to be impacted by higher inflation rates. 

The announcements expand and simplify the available tax incentives for growing businesses by merging the SME and RDEC research and development incentives from April 2024. This will reduce the administrative burden for manufacturers as well as provide more consistency in their R&D claims as they grow. Startups and other loss-making SME manufacturers will also benefit from a lower rate of tax being applied to their incentive credits, to further help their growth and development.  

The announcement of three more Investment Zones along with an extension of the available reliefs from five years to ten shows the government’s focus on levelling up regions of the UK. As a sector with significant representation throughout the supply chain in the regions, particularly the Midlands, the new investment zones with their business rates and tax incentives could stand to benefit the manufacturing sector in particular, even though some of the benefits may have been eroded by the “full expensing” announcements. 

A forward-looking Statement with a welcome focus on the sector 

Manufacturers need certainty in the tax environment to support their long-term investments in the UK. Making capital allowances “full expensing” permanent, extending the EIS and VCT sunset clauses to 2035 and extending the available tax reliefs for Investment Zones all give manufacturers a greater ability to plan and forecast the tax impacts of their investments. 
Overall, it was a positive announcement for the manufacturing sector, and one that was a long time coming. The hope now this that the sector can pick up the baton and help drive growth. 

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