Business

BDO calls for tax incentives to boost UK manufacturing

Two thirds of manufacturers say that a simplification and extension of Research and Development tax reliefs would help drive further investment in the sector

BDO is calling for targeted tax incentives to boost UK manufacturing, after two thirds of manufacturers said they would commit to greater investment in the UK if incentives for capital expenditure were increased.

In its poll of over 200 UK manufacturers, BDO found an “overwhelming” 61% said that a simplification and extension of Research and Development tax reliefs would help drive further investment in the sector.

The new figures coincide with BDO’s manufacturing manifesto, which details a number of targeted tax measures designed to drive recovery in UK manufacturing post-Covid. 

While the UK’s manufacturing sector accounts for £191bn of output, 53% of total exports and 2.7 million jobs, data from Make UK shows that investment intentions have “suffered badly” as a result of the pandemic.

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It warns that UK manufacturing firms are in danger of “falling behind” international competitors without the right incentives to stimulate investment in R&D, green technology, digital transformation, training and jobs.

In light of this, BDO is now proposing a raft of measures to boost investment, including the introduction of new tax credits for manufacturers that invest in reducing carbon emissions.

It is also calling for an extension of the current Annual Investment Allowance limit at £1m until the end of the current Parliament in 2024, giving manufacturers the opportunity to commit to significant capital investment for the medium to long term.

Other proposals include increasing the number of Enterprise Zones to help encourage manufacturing clusters, and simplifying and extending the current rules on employee ownership to drive additional entrepreneurial investment in UK manufacturing.

Furthermore, it wants to introduce new tax incentives that align education or training with specific skills such as robotics and automation that are required by advanced manufacturers.

Richard Austin, BDO’s head of Manufacturing said: “We recognise that the Government is under significant pressure to recoup the costs of fighting Covid-19 but it is vital that the UK’s business tax environment remains competitive relative to other major industrialised nations. Ill-judged tax rises now could have a hugely detrimental impact on manufacturing investment and the UK’s reputation as a place to do business.”

Simon Bird, BDO’s tax lead for the Manufacturing Sector added: “With the right investment conditions, there is a huge potential for manufacturing to support a green economic recovery through the introduction of new technology and digital transformation. 

“A clear, targeted and balanced tax policy would deliver significant benefits for the UK as a whole, helping to drive up productivity and level up the regions.”

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