Dudley Child

The 2011 Budget has given a helping hand to Yorkshire’s manufacturing industry. The UK chancellor, George Osborne, has reduced corporation tax from 28% to 26% and states that this decrease in tax, and other various cuts, would help "put fuel into the tank of the British economy".  The chancellor proposed, before the budget, that he would reduce this tax from 28% to 24% over a 4 year period with a 1% annual decrease, it came as a shock that he reduced this tax by 2% this year and plans to reduce the tax by 1% over the next three years bringing it down to 23%.

However, when you compare the UK’s tax decrease to the tax levels of Europe, even after the decrease, we are not heavily competitive. A report from KPMG in late 2010 states that the average rate of tax being charged to businesses across Europe is 21.5% meaning that the UK are 4.5% over the average. KPMG also state that this trend of reducing corporation tax is likely to continue in order to encourage higher levels of output. Also, even after the reduction the UK’s tax is still considerably higher than that of Republic of Ireland at 12.5%.

This cut in corporation tax allows businesses in the UK to have a larger profit margin allowing them more income to either grow their business in the UK creating more jobs or to allow them to cut prices making them more competitive with countries such as India and China which in turn would help boost the UK’s exports.

The chancellor is very keen to encourage UK based manufacturing companies as he believes "Manufacturing is crucial to rebalancing the economy, “ and quoted that 1400 manufacturing jobs created in last 3 months. This is reflected in the increase in manufacturing output in the UK, which grew by 3.6% in the past few months, the fastest increase since 1994.

Another way of encouraging growth within the UK is the opening of four Technology and Innovation Centre’s focusing on high value manufacturing. The chancellor is keen for the UK to begin to focus on high tech, high value manufacturing as he wishes to lead the economy with a ‘made in Britain’ attitude. He also hopes to tackle this by creating an extra 40,000 apprenticeship places for young people out of work and 100,000 work experience placements.

In conclusion, it is hoped that this budget will help to boost our flagging economy and Chris Sanger, global head of tax policy at the accountants Ernst & Young, calculates that companies would benefit from a £2bn cut in taxes by 2014-15 which is just over £1bn from the reduction in corporation tax, with the remainder coming from a series of changes to the way that profits made overseas by UK-based companies are taxed.

Dudley Child works heavily in the manufacturing and engineering industry remaining up to date with market movements and trends. To view our current vacancies within these industries please visit: www.dudleychild.co.uk