Manufacturers will suffer unless Chancellor raises Capital Allowances

THE Government must take steps to increase Capital Allowances in the forthcoming budget so the North East’s manufacturing sector can continue to thrive, according to accountants and business advisors, Clive Owen & Co LLP.

The Office for National Statistics revealed recently that Britain’s manufacturing sector is enjoying a stronger than expected start to the year with production rising at its fastest annual rate for 16 years in January.

Booming demand for goods from the US, Europe and China has also driven exports up to an all-time high of £25.1billion.

But Nicola Bellerby, a tax partner at Clive Owen & Co LLP in Durham, says the Government must take firm steps to protect private industries, such as manufacturing, in March 23’s Budget if it wants to see real jobs growth shifted from the public sector.

“The Government needs to increase Capital Allowances so that sectors such as manufacturing can continue to thrive,” she said.

“If the planned cuts to Capital Allowances are allowed to come into force in April 2012 it will put a serious brake on investment by North East manufacturers in new equipment and other assets which they need to grow. In turn, if they’re not spending the local economy will also be hit hard.”

Capital Allowances mean companies can discount a proportion of the cost of new machinery and equipment against their profits before calculating corporation tax. At the moment, the incentive applies to the first £100,000 of spend but the figure is due to be reduced to £25,000 in April 2012.

Clive Owen & Co wants to see the allowance increased in the Budget and believes there are other measures the Government can take to stimulate private sector growth including:

  • Protecting research and development tax breaks. For example, Clive Owen & Co helped Darlington-based Diesel Do Nicely receive £32,000 in cash back from the Government in February last year as part of a research and development tax credit scheme.
  •  Extend the National Insurance holiday for new businesses for its first ten employees from one year to two years.
  •  Put pressure on the banks to free up lending to businesses, particularly new start-ups.

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