The outlook has become more difficult for manufacturers as growth in both the domestic economy and key export markets has weakened appreciably. In addition, companies are grappling with a considerable increase in their cost burden.
Manufacturers have embarked on a range of strategies – from increased innovation and capital investment to new market entry – in order to improve productivity and competitiveness. While these have put the sector on a surer footing going into this downturn, it is critical that these activities are not derailed during this period of weaker growth.
This Pre-Budget Statement, therefore, offers a window of opportunity to implement timely, targeted and temporary measures to ensure that manufacturing is equipped to maximise the growth opportunities where they still exist and to take advantage of the recovery when it comes. It is essential that manufacturing maintains the capacity to thrive over the long term.
Business recognises the current constraints on the public finances, but short term measures are needed to reduce the cost burden facing businesses, to provide temporary additional support for investment and to postpone measures that might add to the regulatory compliance burden.
While recent government policy has focused on supporting the key drivers of productivity – skills, innovation, enterprise and investment – attention should now turn to laying the foundations for the long term competitiveness of the tax system and energy supply.
A clear statement on the future direction of corporate tax policy is needed to give business confidence that concerns over competitiveness and complexity will be addressed. Given the weaker economic climate facing business, now is the right time for government to set a positive agenda of how businesses can best be supported through the tax system.