Manufacturers urge government to avoid tax increases on industry

Manufacturers have warned the government against imposing further tax increases in the chancellor’s next pre-budget report.

Manufacturing organisations will have to fork out an extra £11.9bn in taxation in 2008-09 than they did in 1996-97, according to a report from trade body EEF, in conjunction with 19 other representative bodies.

The EEF’s analysis shows that most Organisation for Economic Co-operation and Development (OECD) economies have suffered from seeing their tax burden increase and have dropped down the competitiveness league tables as a result.

The UK fell from 7th to 13th place between 1997 and 2006, on the measures compiled by the World Economic Forum.

EEF director general, Martin Temple, said: “There is a danger of the UK losing its attractiveness as a location for manufacturing at a time when other factors are loosening ties with the UK. At the same time, there are a growing number of business-friendly locations around the world and reasons for remaining in the UK are therefore becoming less compelling for manufacturers”

“Despite manufacturers posting a strong performance this year they are swimming against the tide,” said Temple. “The chancellor can reassure companies that he understands the severe pressure they are under by signalling a clear intention that steps will be taken to ease the burden bearing down on them.”

The EEF’s key priorities were set out as follows:

  • Tax There should be no further rise in the business tax burden, especially on energy.

  • Government spending In its spending review the government must stick to its early indications that its budget will increase in real terms by an annual 1.9% between 2007 and 2010, so that it declines as a share of the economy.

  • Investment There should be a comprehensive investigation into the factors behind the weakness in manufacturing investment.

  • Innovation The government should introduce an incremental ‘top up’ to the existing volume based research and development tax credit and take steps to make much better use of public procurement to stimulate innovation.

  • Energy A package of measures should be introduced on energy efficiency, in particular extending climate change agreements to any sector than can demonstrate a credible plan to deliver efficiency gains.

  • Skills There must be a radical, sector-led approach to skills reform, as in the Leitch Review, with an avoidance of any moves towards employer compulsion on training.

  • Business support The government should provide appropriate funding for vital business support schemes, in particular, there should be a fully resourced UK Trade & Investment, as well as an enhanced role for the Manufacturing Advisory Service.

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