Budget 2015

The Budget: what it means for your business

By Michael Stones contact

- Last updated on GMT

The Budget delivered bonuses and brickbats for the food and drink manufacturing industry, said industry groups
The Budget delivered bonuses and brickbats for the food and drink manufacturing industry, said industry groups

Related tags: Corporation tax, Minimum wage, Chancellor

Food and drink manufacturers will find points to praise and areas of disappointment in the chancellor George Osborne’s summer Budget – which he lauded as “a new contract with the nation”, according to the Food and Drink Federation (FDF).

Manufacturers will welcome the chancellor’s investment in British business through the cut in corporation tax, a doubling in the Annual Investment Allowance (AIA) and cuts in employer National Insurance contributions, said the FDF.

Commenting on the Conservatives’ first budget in 20 years, FDF director general Ian Wright said: “Our sector is facing significant skills shortages, particularly in engineering and technical roles and the apprenticeship route is a hugely important way to build our talent pipeline. We will be seeking further clarity on the detail of the apprenticeship levy ...

Food manufacturing

Continued investment in research and innovation was welcome, but the FDF wanted to see more support for post-farm gate, pre-competitive and collaborative research in food and drink manufacturing via Research Councils and Innovate UK.

While welcoming the national living wage in principle, many leading members had already committed to pay the living wage, it claimed. The direct impact on the thousands of small and medium-sized food businesses should be minimised to ensure the future competitiveness of the food and drink manufacturing sector, said Wright.

Budget bonus

  • Cut corporation tax (FDF), (CBI), (EEF)
  • Double annual investment allowance (FDF), (CBI), (EEF)
  • Cut employer National Insurance contributions (FDF), (CBI), (EEF)
  • Investment in research and innovation (FDF)
  • Measures to balance the books and boost investment (CBI)
  • New Roads Fund (CBI), (EEF)
  • National Living Wage (EEF)

“The counterbalance of a reduction in corporation tax and National Insurance contributions will go some way in helping food and drink manufacturers to manage this change.” 

‘Double edged for business’

The Confederation of British Industry (CBI) described the budget as “double edged for business”. ​CBI boss John Cridland said: “Firms will welcome measures to balance the books and boost investment, but they will be concerned by legislating for wage increases they may not be able to deliver.”

Business will welcome the chancellor’s deficit reduction plans and the clarity that the new fiscal rules provide. The CBI also praised the provision to make the AIA permanent at £200,000 and much-needed investment in roads.

“The further reduction in corporation tax is a welcome surprise,” ​said Cridland. “But tax reductions for employers don’t appear to match the businesses most affected by a rise to £7.20 in the National Minimum Wage next April – a 7% increase.”

While the CBI supported a higher skilled, higher wage economy, legislating for a living wage did not reflect businesses’ ability to pay. “This is taking a big gamble that the labour market can absorb year-on-year increases of an average of 6%.”

‘Taking a big gamble’

The National Living Wage will present small shops, hospitality firms and care providers with “real challenges”​ in paying for the increases, Cridland predicted. “Delivering higher wages can only be done sustainably by boosting productivity. Bringing politics into the Low Pay Commission is a bad idea.”

Budget brickbats

  • More support for post-farm gate, pre-competitive and collaborative research in food and drink manufacturing via Research Councils and Innovate UK (FDF)
  • Legislation for wage increases (CBI)
  • Apprenticeship levy (CBI)

On apprenticeships, Cridland said: “Firms want to play their part in training up more apprentices but an apprentice levy is a blunt tool. A volunteer army is always better than conscription but the CBI will work with the government to make the best effect of this measure.”

Manufacturers’ organisation EEF said the chancellor had “served up a number of aces”.​ Its chief executive Terry Scuoler praised: business investment allowances, plans to cut employer National Insurance contributions, phased reductions in corporation tax, funding for road improvements and the principle of establishing a new national living wage.

But less impressive was the training levy which manufacturers would have to shoulder. “Employers must be in the driving seat on this reform to ensure we get the right quality of apprenticeships and training,” ​said Scuoler. “There will be no tolerance for recreating the failed skills bureaucracy of the past.”

What the others say

Freight Transport Association​, deputy chief executive, James Hookham:

“The chancellor has listened to the voice of industry by keeping fuel duty at current levels, which is to be welcomed. However, the government has emphasised that its primary objective is to protect the UK economy. We believe that reducing fuel duty would make a huge contribution to this objective and we will continue to campaign with Fair Fuel UK for a 3p per litre cut in order to stimulate economic growth.

National Farmers Union​ (NFU) chief economist Gail Soutar:

“We are pleased that the chancellor announced that he would be setting the Annual Investment Allowance permanently at £200,000. The NFU highlighted the need for the government to set a long term, substantial level for AIA in our manifesto in order to  give some security to our farmers and growers who can better plan for the future by investing in their businesses – which is particularly important during these volatile times.

“Unfortunately the current capital allowances system does not fully reflect the full cost of investment for farmers. We had hoped to see some progress on buildings and fixed structures that are considered wasting assets.  Similarly reductions in corporation tax will have a limited impact on the 92.5% of farm businesses that are sole traders and partnerships.

“Like many people across the country, our members will be relieved that fuel duty will remain frozen for the remainder of the year. There were several other announcements made today that we will need to explore in further detail.”

SmartCurrencyBusiness.com​, director Carl Hasty:

“UK businesses will see some changes as a result of UK chancellor George Osborne’s Budget report, including a rise in the annual investment allowance to £200,000 a year and gradual cuts in Corporation Tax – now 20% - to 19% in 2017 and 18% in 2020. Tax periods for big companies will be adjusted to be closer to when they receive profits.

“The bank levy will be phased out, and replaced with an 8% surcharge on bank profits. This is expected to cost more than the levy, and could mean that banks have to charge higher costs to customers in order to maintain profit margins. This means that UK businesses could be better off looking for alternative providers of finance and financial services.

“The downward revision of global growth was also mentioned, with the Office for Budget Responsibility projecting gross domestic product growth of 2.4% for 2015, down from the 2.5% forecasted in the March Budget. The report implied that a more productive workforce and higher levels of private investment would help to improve productivity, but did not go into detail about how UK productivity is meant to improve.

“It also did not mention how it would address the previous coalition’s target of £1trn in UK exports by 2020. A special export task force had been announced prior to the Budget report, but there were no details as to how UK exporters are to grow and thrive, particularly given a struggling eurozone, strong sterling, and the China stock market crash.”

Anaerobic Digestion and Bioresources Association​, chief executive, Charlotte Morton:

“Despite addressing the need to secure Britain’s future – both in terms of financial and national security – there was no reference to the importance of food and energy security, or the need to support green industry to drive economic growth.

“While ADBA’s latest market report demonstrates that the number of biomethane plants has tripled between 2014 and 2015, there are unlikely to be any new biomethane plants without signalling an extension to the RHI budget beyond March 2016.

“Without additional biomethane capacity the AD industry will be unable to contribute to the EU Renewable Energy Directive target of 12% heat from renewable sources by 2020. Home-grown green gas can potentially meet as much as 30% of the UK's domestic gas demand - reducing our dependence on imported natural gas from Qatar and Russia - or fuel around 80% of heavy goods vehicles.”

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1 comment

Budget: what it means for your business

Posted by A Johnson,

Everyone in the food industry should be very worried. Consumers with low wages will find their disposable income decreased further and therefore will be able to spend less, meaning that less products will be sold. Together with the proposed new minimum wage hike, there'll be a squeeze on retailers and suppliers alike. Employers (both retail and in the food industry chain), will have to make 'difficult' decisions - meaning higher prices and job losses to pay for these changes.

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