Budget 2016: Industry calls for business rates reform in Budget

Posted On: 14th March 2016

Britain’s manufacturers are calling for the reform of business rates in this week’s Budget by the removal of plant and machinery from rateable calculations. In particular, this would provide a boost to highly capital intensive sectors such as steel.Government Opportunities

Making the call, EEF, the manufacturers’ organisation published data showing the likely additional boost that would follow with 42% of companies saying they would invest more if plant and machinery were removed from the calculation of business rates. Those more likely to up their investment are manufacturers with a turnover of below £5m (51%) and those with a turnover over £50m+ (52%). These figures are additional to investment already planned.

According to EEF, at present the inclusion of plant and machinery represents a tax on investment. For example, if a business increases its investment in ‘rated’ plant and machinery, such as a blast furnace in the steel sector, that increases their rateable value and, with it, their business rates bill. This is fundamentally contrary to the Government’s own productivity plan, which looks to remove barriers for firms looking to invest in boosting their productivity.

Making its case, EEF also pointed to the fact that capital intensive firms in the UK have large additional business rate costs whilst buying plant and machinery compared to their European counterparts such as France and Germany. In 2010, the French reformed their system of local taxation similar to business rates to remove plant and machinery investments from calculations noting the punitive impact on French manufacturers.

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Commenting, EEF Chief Economist, Ms Lee Hopley, said:

“Our evidence shows that removing plant and machinery from the calculation of business rates could help tip the balance for some companies, notably small manufacturers looking to scale up, and large manufacturers facing international competition. Given manufacturers’ investment intentions are currently subdued, government needs to act now to remove this tax on investment and help to anchor manufacturing in the UK. Any moves that bring additional investment into manufacturing and the UK economy can only be good for UK growth and productivity.”

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