Despite cash constraints and the ongoing recession, manufacturers invest for the long term. So despite cash constraints and the ongoing recession manufacturers are looking to the future, knowing that the investments they make now will determine their competitiveness in the future.
But the corporate tax system needs a strategic overhaul if investment in manufacturing investment is to drive the upturn and help build a better balanced, high value UK economy.
According to the report ‘A Manufacturing Future – Competitiveness and taxation in the UK’, much of the UK’s business tax system remains rooted in the past and is actively constraining manufacturers’ investments, compounding the credit crunch and limiting the extent and benefits of a balanced economy.
Politicians of all stripes must match their commitment to promoting a more balanced economy in which manufacturing plays a greater role by addressing the current failings in our tax system. We need a system which continually evolves to reflect the realities of rapidly changing technologies and global competition. In particular, the government must ensure that the taxation of investment reflects the true costs of high-value manufacturing investment.
NOTE: To help us set out a long-term tax strategy for manufacturing and a better balanced economy, we set up EEF’s Business Tax Panel, a diverse group of our members. Supported by PricewaterhouseCoopers and working with a range of government officials and independent experts, the group believes the UK needs a more coherent tax strategy, one designed to deliver a diverse economy.
Commenting on the report, Andrew Churchill, managing director of JJ Churchill and a member of EEF’s Business Tax Panel, said:
“Running a sub-contract precision engineering business, surviving the recession will be painful. The much more substantial challenge will be surviving the upturn. In a high-labour cost economy, the only reason we remain in business is through process innovation that is inseparably hitched to the rapid evolution in machine tool technology. Quite simply, if we fail to aggressively re-invest in capital equipment we are accepting a rapid erosion of our competitive advantage – in essence we increasingly compete on our cost of labour, a battle we know we can’t win.
“Currently, our tax system fails to recognize the importance of capital investment to manufacturing or the advanced technologies and short lives of modern machinery. In buoyant times, this puts a hidden brake on the abilities of companies to re-invest; in recession it positively discourages the one thing the government must catalyse if, in the upturn, we’re to have a balanced economy.”