Food manufacturers have urged Chancellor George Osborne to review the current R&D tax regime ahead of his autumn statement tomorrow (November 29), which they feel is “unfairly penalising” the sector.
The FDF called on the chancellor to address the issue to encourage greater innovation in the industry and to remove the burden imposed on small businesses.
A spokeswoman for the FDF told FoodManufacture.co.uk: “Government needs to review the current R&D tax regime to encourage greater innovation in the sector. Often smaller food companies do not qualify for this and it unfairly penalises the industry and risks innovation moving to other countries. This is a big issue for Small to medium-sized businesses (SME’s) in particular which find this process very difficult.”
“The importance of SMEs in the sector is enormous”, she added. “They are its backbone, with 96% of the sector made up of firms employing less than 250 employees. Government needs to find ways of making it easier for SMEs to access finance.”
The proposal was also backed by the Federation of Small Businesses (FSB), which described the current tax regime as “one of the biggest burdens for this sector”.
The FSB called on the government to provide a particular focus on reducing regulation on small businesses as well as tackling the “pressing” problem of rising youth unemployment in the UK.
The government must also be “bold” and tackle “long standing barriers” to businesses, a statement from the FSB revealed.
John Walker, national chairman of the FSB said: “For small businesses to welcome the statement, they need to see clear evidence that policies already announced are having an effect on the ground. Too often, the impression is that good intentions are not translated into tangible benefits for businesses.
“Conditions in the Eurozone remain a major source of instability and uncertainty, but there are still actions the Government can take to foster business confidence and remove barriers to job creation.”
Among the issues also highlighted by the FSB is a proposal to introduce a true fuel duty stabiliser that will trigger a reduction in pump price.
The federation believes that the fair fuel stabiliser announced at the previous budget does “not go far enough” meaning that businesses cannot plan overheads properly as a result.
This fear was echoed by the British Chilled Food Association which believes there is currently a squeeze on food firms from further down the supply chain.
Kaarin Goodburn, secretary general of the Chilled Food Association told FoodManufacture.co.uk: “I think we need to see the industry given some sort of protection against the government’s tax on fuel prices.
“It would be nice to see some recognition of the extreme importance that this has on the industry as producers are being squeezed because retailers don’t pay for it.”
The FDF now wants the food and drink sector to be considered an “energy intensive industry” and urged Osborne to consider the impact of any additional costs on businesses.
Speaking at the Food Manufacturing Excellence Awards earlier this month, Melanie Leech, FDF director general, argued the case for a “genuine shared vision” between government and the industry.
She said: “Companies would like to see support from government in the two key areas of taxation and skills training to help them be competitive on a global stage.”
Large companies in particular consider that government interventions and labour costs pose the biggest current and future risks for the food and drink manufacturing sector, according to Leech.
She added: “We are not a sector that asks for hand-outs. But current economic pressures are constraining longer-term investment decisions in areas such as skills and training and government support could help address this market failure.”