Budget must address rising cost of business

As part of its budget submission EEF, the manufacturers’ organisation, says a raft of recent policy announcements have come at a time when industry is facing significant global headwinds.

Almost four in ten manufacturers (36 per cent) identify rising business costs as a key risk this year. At the same time, the proportion of companies viewing the UK as a competitive place to do business has fallen from 70 per cent in 2015 to 56 per cent this year.

Industry’s concerns range from the introduction of the new apprenticeship levy to the future cost and complexity of energy-related taxes.

The apprenticeship levy will come into effect in April 2017, at a rate of 0.5 per cent of an employer’s pay bill. A £15,000 allowance for employers will mean that the levy will only be paid on employers’ pay bills over £3m.

To help offset the current crisis in the steel sector, EEF is calling on George Osborne to remove plant and machinery from the calculation of business rates.

Amid concern about another change in pension rules, employers are also urging the Chancellor to retain the current tax treatment of employment pension contributions and avoid saddling employers with a plethora of direct and unintended penalties for their continued support of workplace pensions.

Andy Tuscher, Yorkshire and Humber region director at EEF, said: “While many of the risks we face stem from challenges in the global economy, companies are increasingly concerned about the creeping onslaught of taxes and policy decisions falling at the door of employers.

“In isolation individual policy decisions may not be significant, but when viewed together they are adding significant cost at a time when business conditions are volatile to say the least.”

Mr Tuscher added: “With investment intentions looking more fragile, the Chancellor should plot a course that avoids piling more costs on employers and one which gives manufacturers the certainty to invest for the future.

“This means ensuring the apprenticeship levy works for sectors that have a track record of investing in their people; removing the disincentive to invest from the business rates system and avoid tinkering with pensions in a way that adds even more costs to employers.

“We are concerned that the additional costs we face after just six months of this parliament could be the thin end of an ever thickening wedge.

“The Chancellor should look at future tax reforms and fiscal changes within the broad context of a clear long-term strategy supporting industry.”

In its submission, EEF said the Government’s focus on productivity should be further developed by expanding the new Roads Fund to cover local road improvement as well as implementing the Airports Commission’s recommendation for an additional runway at Heathrow airport and reviewing competition of the business internet connectivity market.

It also called for increased core funding for new Catapult Centres and the development of a long term coherent energy strategy.

Earlier this month, the CBI warned that businesses face annual burdens of £9bn because of a “spate” of Government policies on issues including pay.

The CBI highlighted the new national living wage, apprenticeship levy and “inaction” on business rates as hitting firms’ ability to invest and create jobs.

It also said the rising burden of costs on businesses has “crept up far enough.”