Summary
Modern manufacturing
- EEF’s latest Business Trends Survey shows manufacturing maintaining the strong performance it has recorded since 2004.
- Investment intentions continue to strengthen as manufacturers look to sustain the 25% increase in productivity seen in the last five years.
- We believe that a growing proportion of this investment is in intangibles. EEF research shows companies place an increasing emphasis on activities such as design and development and providing services as sources of competitive advantage
- This research also shows that the UK faces a fight to attract and retain activities such as research and design and development, where foreign-owned firms are involved. It is therefore vital that the UK business environment is internationally competitive in areas such as science, skills and innovation and also on business taxation.
Comprehensive Spending Review priorities
Skills
- Improving the flow of Science, Technology, Engineering and Mathematics (STEM) skills into industry. Key priorities in this area include investing in the equipment and facilities for science teaching and to deliver Specialised Diplomas; increasing the quality of careers advice and the effectiveness of activities to promote STEM; and raising the number of qualified teachers in STEM subjects.
- Supporting employer investment in skills. Funding high quality apprenticeships for adults, reviewing the organisations of Sector Skills Councils and simplifying the complex skills system are amongst the key priorities in helping manufacturers to invest in their workforce.
Innovation
- Knowledge transfer. With evidence that relationships between business and universities are improving, the CSR should build on this progress. We propose the introduction of shorter, simpler Knowledge Transfer Partnerships to make it easier for small firms to participate and First Engagement Vouchers to take the risk out of working with the science base for firms that are new to it.
- Procurement. Simpler guidance for procurers, and investment in their skills, are required to improve the effectiveness of public procurement in stimulating innovation. The Technology Strategy Board can also play a role in stimulating innovation on high-risk projects.
Export support
- EEF research shows that support for exports, particularly that provided on the ground in emerging economies, is highly valued by business and makes a difference to their export performance, which is in turn associated with productivity gains. The government must back UKTI with the funding required to deliver a high quality service
Business support simplification programme
· We support the government’s proposals to reduce the number of business support programmes, to organise them around a small number of themes and to simplify access to them. However, the Manufacturing Advisory Service must be retained as a distinct entity.
· The government should also allow room for the development of new ideas, usually as pilots, by organisations closest to the customer.
· Business Link must recruit the best, most knowledgeable employees, who understand the needs of business and are able to effectively undertake the diagnostic if it is to deliver on its role as the portal through which business accesses the portfolio of support programmes on offer.
Business taxation
- The government’s first priority should be a lower tax burden through a competitive headline rate of corporation tax, not financed by offsetting changes e.g. in allowances. Subject to the public finances improving in line with economic and continuing tight control of public spending, it should cut the headline rate of corporation tax to 25% by 2010/11.
- The Annual Investment Allowance should be available for both bought and leased assets.
- The government must also make greater progress on simplification of the tax system.
- The aims of certainty for business; a risk based approach to dealing with tax matters; speedy resolution of issues and clarity though consultation recommended by Sir David Varney’s review should all be extended to HMRC’s dealings with small- and medium-sized businesses.
- Environmental taxes on business have a role to play but only as part of a package of measures including trading, regulation, information and support for innovation. Care must be taken to ensure that the increased costs associated with environmental taxes and other measures do not generate carbon leakage.
Blunt instruments that simply raise the cost of energy should be avoided and taxes should be based around progress made in increasing energy efficiency and reducing carbon emissions. There should be a greater emphasis on tax incentives to reduce carbon emissions and less on a punitive approach. These incentives should be available for both bought and leased assets.
- In principle, we oppose the introduction of a Supplementary Business Rate as this would add to the cost of doing business for manufacturers already subject to intense international competition. Should the government press ahead with Supplementary Business Rates, any proposal by a local authority to introduce one would need to pass a number of strict tests.
In particular, there would need to be clear evidence that the revenue was supporting something above and beyond current spending proposals, safeguards to ring-fence revenue to ensure funds could not be diverted into other existing schemes and a rigorous approach to establishing whether it commanded business support. In summary, any authority would need to demonstrate that it was adding real value to business competitiveness.