Budget should back business says UK automotive

15 March 2011 #SMMT News

The UK motor industry’s Budget submission to the Chancellor calls for measures to encourage recovery, assist business growth and boost consumer confidence.  

SMMT expects consistent growth across the automotive sector by 2012 but to ensure and sustain this, positive government action is essential.
“The manufacturing sector is leading economic recovery and government must use this Budget to sustain and enhance this position,” said SMMT Chief Executive, Paul Everitt. “This Budget comes at a critical time for UK automotive and we’re urging government to deliver the right mix of supportive policies to secure sustainable growth and strengthen the role of the UK as leading developer, producer and exporter of automotive products. Better targeted and strategic use of existing policies, funding instruments and business taxation will help automotive manufacturers and suppliers in the UK realise their potential and position the UK at the forefront of future technology development.”
SMMT called for certainty on motoring taxes, a freeze on fuel duty and measures to support business investment and access to finance. In its submission, the Society set out the steps it believes government should take to promote sustainable growth in the automotive sector as a key part of the UK’s economic recovery.
Corporate measures:
To promote business growth, government should:
·         Continue to put pressure on banks and the finance community to improve access to working capital, investment finance and credit guarantees.
·         Restructure the R&D tax credits regime to make it work better for high value manufacturing and incentivise increased R&D spending by the automotive industry in the UK.
·         Enhance the Capital Allowances system to acknowledge the capital intensity, global footing and cyclical risks of the automotive sector.
·         Review Business Rates to ease regulatory costs on the manufacturing sector and make UK operations internationally competitive.
·         Provide greater clarity on how environmental taxes and commitments are applied to businesses to retain competitiveness.
·         Realise the growth opportunities from international trade, exports and inward investment by adopting a consistent trade policy that supports manufacturing.
·         Attract international investment and help UK-based businesses to compete on a global playing field by making sure tax regulations are globally competitive.
·         Build on UK engineering and academic excellence by working to integrate university and industry research and development.
·         Support the work of the Automotive Council by improving coordination of public and private activities and supporting its recommendation for the sector in policies and programmes.
Consumer measures:
With a significant squeeze on business and household spending, SMMT recommended that government should:
·         Relieve the immediate financial pressure on businesses, fleet operators, hauliers and motorists by freezing fuel duty.
·         Deliver stability and certainty to motorists by not raising duties on vehicles beyond levels set in the 2010 Budget.
·         Remove the first year VED rate.
·         Urgently implement a scheme to incentivise the purchase of low carbon commercial vehicles.
·         Set out a durable and consistent set of measures or incentives to support the uptake of alternative fuels.
·         Put in place long-term commitments to support low carbon infrastructure development to enhance consumer and business confidence in low carbon technologies.
·         Consider a means of assessing VED for commercial vehicles based on age and environmental status to incentivise the adoption of the most efficient vehicles.
·         Remove the unjustified three percentage point penalty on diesel company cars.
Industry and government collaboration through the Automotive Council is setting the strategic agenda for competitiveness and growth in the automotive sector in the UK. SMMT suggests that the 2011 Budget should take up this strategic agenda and promote investment in capital equipment, R&D, low carbon technologies and skills. These measures, coupled with schemes to enhance the availability of finance and credit are crucial to reinforce the commitment of existing UK-based operations, while broadening the appeal of the UK and the automotive industry to new suppliers and investors.
UK automotive represents around 3% of total GDP, accounts for two thirds of total manufacturing turnover and is the country’s largest sector in terms of export, generating around £24 billion in revenue. Typically achieving a turnover of around £50bn, employing over 700,000 people and producing an annual net value-added to the economy in excess of £10bn, the significance of the sector cannot be underestimated. In 2010 the industry spent £1.5bn on R&D in the UK.

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