‘Business Support needed urgently’

Finance, News, Tax,

The recent Make UK / BDO Q2 Manufacturing Outlook survey reports that manufacturers in the UK are calling for an emergency package of measures to support companies facing escalating costs. The survey shows that growth and orders are slowing significantly, exports are at a standstill and investment is falling as companies prioritise cashflow.

Coupled with the prospects for the next six months, Make UK claim businesses cannot wait for the support promised to be included in the Autumn Budget.

The recommendations from Make UK include the following:

  • Waive or reduce business rates for the next 12 months
  • Implement VAT deferrals for larger businesses and waive completely for SMEs
  • Temporarily freeze the Climate Change Levy and, if energy costs continue to rise, remove it completely
  • Review the efficacy of the business interruption loan schemes introduced during the pandemic and deploy a successor scheme by Q3
  • Extend the 130% super-deduction tax break, due to end in March 2023
  • Make the increase in the Annual Investment Allowance permanent
  • The Government needs to prove that it can operate with a long term strategy to encourage foreign investors.

According to the survey, investment intentions dropped sharply from +27% in Q1 to just +5% as companies cut or postpone their plans in response to rapidly escalating costs.

Two thirds of companies (67.8%) said rising energy costs were causing major disruption, almost three quarters (71.9%) cited increased raw material costs posing a similar threat and, two thirds (66.8%) cited rising transport costs.

Manufacturers expect to continue to increase their UK and export prices substantially in the next quarter to +69% and 63% respectively, with both these figures dwarfing previous record levels in the survey’s 30-year history.

Stephen Phipson, chief executive of Make UK, said: ‘Whilst industry has recovered strongly over the last year we are clearly heading for very stormy waters in the face of eyewatering costs and a difficult international environment. Clearly some of the factors impacting companies are global and cannot be contained by the UK government alone. However, given the rate at which companies are burning through their balance sheets just to survive, it must take immediate measures to help shield companies from the worst impact of escalating costs and help protect jobs.’

Richard Austin, head of manufacturing at BDO, added: ‘Manufacturers have shown their ability to overcome a wave of challenges over the last couple of years to remain competitive. The question is when fatigue will overcome resilience. The tipping point where the shorter term need to retain cash outweighs investment is starting to be reached and could have significant implications for future growth. Rapidly rising input costs, ballooning energy bills and in some cases inflation-busting pay settlements have hit margins and frozen investment plans. There is now a strong case for government action to help UK manufacturers weather the immediate storm and incentivise investment for long-term growth.’

Whilst we agree entirely that business owners fatigue is overcoming resilience in an increasing number of cases, it’s essential that any further support is full costed and affordable. We remain to be convinced that the above recommendations are achievable, but are optimistic that some kind of support may be forthcoming. We just hope businesses can hold on until they arrive!

If you’re struggling with cashflow, or feel that things aren’t improving as you’d hope as we move from the pandemic into increasing costs, please don’t suffer in silence! Please get in touch, and we’ll happily talks things through with you and see how we can help.

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