Budget needs to sustain investment says UK automotive

13 March 2012 #SMMT News

The Society of Motor Manufacturers and Traders will today brief a group of senior parliamentarians on the need to sustain growth and encourage further investment in next week’s Budget statement.

The necessity for government to deliver on taxation reforms, particularly on the important R&D tax credit system promised in the Autumn statement, act on its growth strategy and sustain consumer confidence were addressed at a meeting of the All-party Parliamentary Motor Group, which focused on the outlook for automotive.

SMMT celebrated last year’s £4 billion investment made by industry, but warned against complacency, and stressed the need to attract long-term investment in R&D, advanced skills, capital equipment and new model production to remain globally competitive.

“The UK motor industry has made steady progress during the last 18 months with increased production, substantial new investment and growing exports,” said Paul Everitt, SMMT Chief Executive. “The Budget must help to sustain this by encouraging long-term investment in skills, R&D and capital equipment. To make the most of new and emerging opportunities the Chancellor must progress the R&D tax credit reform, increase capital allowances and avoid any further squeeze on hard-pressed businesses and consumers.”

SMMT called for stability and certainty on motoring taxes, and encouraged greater incentives – such as the Plug-In Car and Van Grant – to move business and retail consumers towards more efficient and low carbon technologies. The Society reiterated the need for continued business investment and easing access to funding. In its submission, SMMT 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:

  • Finalise R&D tax credit reform, attracting further investment in R&D facilities in the UK and communicate the upfront ‘above the line’ credit effectively.
  • Enhance the Capital Allowances system to acknowledge the capital intensity, global footing and cyclical risks of the automotive sector.
  • Continue to put pressure on banks and the finance community to improve access to working capital, investment finance and credit guarantees.
  • Review Business Rates to ease regulatory costs on the manufacturing sector and make UK operations internationally competitive.
  • Reduce the complexity of energy efficiency regimes to restore confidence and stimulate business investment by reducing the burden.
  • Realise the growth opportunities from international trade, exports and inward investment by adopting a consistent trade policy that supports manufacturing.

Consumer measures:

With a significant squeeze on business and household spending, SMMT recommended that government should:

  • Deliver stability and certainty on motoring taxes and duties. This is not the time for short term radical changes, or substantial rate increases.
  • Support a durable and consistent set of measures or incentives to support the electric re-charging and servicing infrastructure and uptake of alternative fuels.
  • Reassure business fleets that the company car tax regime remains clear and consistent so that car users can confidently make future car plans.

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 believes the 2012 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. Each year the industry spends around £1.3bn on R&D in the UK.

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