What did the Chancellor’s ‘mini-Budget’ deliver for manufacturers?
Released On 23rd Sep 2022
Today the new Chancellor (and former Business Secretary) Kwasi Kwarteng MP delivered a ‘mini-Budget.’ Within this he also announced a new Growth Plan (not to be confused with the previous Plan for Growth).
So, what did he announce and what does it mean for manufacturers? Here are some of the highlights:
- Permanent increase to the Annual Investment Allowance of £1m: This is a major POLICY WIN for Make UK and our members. We have campaigned long and hard for the increase to be permanent and it's finally here. This will provide much-needed certainty business have been seeking for the past two years, particularly for smaller manufacturers who will now be able to make long-term plans to invest in critical areas of their business, from automation to improving energy efficiency and self-generation.
- National Insurance Contributions (NICs) increase cancelled from 6 November onwards: Another POLICY WIN for Make UK. This was always a tax on jobs which we had called illogical and ill-timed, and it seems like common sense has prevailed. The reversal will now see more cash in pockets for businesses and consumers - and don't we all need it right now!
- Corporation Tax frozen: We were due to see Corporation Tax increase to 25% from April next year but today the Chancellor announced plans to scrap that idea and instead keep it at 19% to make the UK a more competitive place to invest in. It's good news but we would have preferred to see the Chancellor focus more on pre-profit taxes and hint at a more radical reform of the business rates regime which has been hampering business growth for some time.
- New Investment Zones announced: They're not Freeports, they're not Enterprise Zones, they're Investment Zone - which will provide time-limited tax reliefs, and planning liberalisation to support employment, investment, and home ownership. Jury is still out on this one. On the one had you've got areas of opportunity for businesses who would benefit from business rates relief and enhanced capital allowances. On the other hand, it could run the risk of moving existing activity to other areas and worst case create extra internal trade barriers.
- Supporting over 50-s back into the labour market: There wasn't a lot on skills, however there was acknowledgement, as Make UK has continued to point out, that there is an increased number of over-50s that are now economically inactive. So, the Chancellor announced plans to support over-50s back into work via intensive, tailored support at local jobcentres. We've got some ideas here already such as using the Workforce Industry Exchange to allow experienced workers to contribute as part of the teaching workforce and train the next generation of talent.
This is the beginning what is being unveiled as the Plan for Growth, sorry the Growth Plan.
What was clear today is that these are the measures Government is going to take now. But there is a lot more to come - it was almost policy topic bingo with the words - pensions, industrial action, regulatory reform, housing supply, immigration, all being called out by the Chancellor with a promise of further unveiling to come in the Autumn. We've been calling for a National Manufacturing Plan for some time and here's hoping that the Growth Plan can be the building blocks for one.
And what about energy?
What manufacturers will mostly want to know is the detail behind the Energy support scheme. Thanks to our Partners Inspired Energy, we've got more detail behind what was announced earlier this week (another huge POLICY WIN) which you can find here:
Here are the headlines:
- All non-domestic users (businesses included) will get a discount on the wholesale cost of electricity and gas.
- All fixed contacts agreed on or after 1 April 2022, as well as to deemed, variable and flexible tariffs and contracts, are included.
- It will apply to energy usage from 1 October 2022 to 31 March 2023, running initially for a six-month period with a review midway (for possible extension).
- The government will set a Supported Wholesale Price - likely to be £211 per MWh for electricity and £75 per MWh for gas - which is a reduced price per unit of gas and electricity.
- This relief will include the removal of green levies paid by non-domestic customers and is equivalent to the wholesale element of the Energy Price Guarantee for households.
- The amount of price reduction each business will receive will depend on their contact type and circumstances.
- Non-domestic customers on existing fixed price contracts will be eligible for support provided the contract was agreed on or after 1 April 2022.
- Business entering new fixed price contracts after 1 October 2022 will receive support on the same basis.
Ok so it’s not perfect. Six months isn’t enough when energy prices aren’t expected to come down anytime soon and we’ve already been feeding that into Government. We’ve also had companies share concerns at fixing at a high rate but before April 2022 so that’s on our hit list of issues to pick up too.
If you have any questions or feedback, you want Make UK to take to policy makers you can email us at makeukcentrakpolicy@makeuk.org.
