UK budget largely positive, says food and drink industry

By Joyeeta Basu contact

- Last updated on GMT

The budget showed a revised forecast for UK growth in 2015 from 2.4% to 2.5%
The budget showed a revised forecast for UK growth in 2015 from 2.4% to 2.5%

Related tags: Tax

The drop in corporation tax, promise of increased investment funding and support for British farmers in the 2015 UK budget were largely supported by British food and drink manufacturers.

But more backing for exporting food and drink companies and better access to funds that supported innovation would have been better, they said.

What came as good news for the alcohol industry was beer duty being cut for the third year in a row. There was also another penny off a pint, a 2% cut for spirits and most ciders, and a freeze on duty on wine.

Greater support was extended to farmers and they would now have more time to average their profits for income tax. This extended the period from two to five years, and gave farmers additional security as “they typically have volatile profits due to uncontrollable factors such as the weather​”, said the budget.

Mixed bag of treats

The Food and Drink Federation (FDF) interim director general Jim Moseley welcomed the focus on business and support for manufacturing. By contributing £81.8bn (€113.99bn) in turnover, feeding millions and employing 400,000 across the country, “food and non-alcoholic drink manufacturing was at the heart​” of the recovering national economy, he said.

The doubling of UK trade and investment export support targeting the flourishing Chinese market was therefore a positive move but he added that FDF would have liked to see more backing for exporting food and drink companies to bring the UK into line with its European neighbours. “Food and drink exports have continually delivered year-on-year growth, bucking the total UK exports trend, and offer huge untapped potential​,” he said.

The Federation of Small Businesses (FSB) national chairman John Allan said that he welcomed the commitment to raise the annual investment allowance. “[The] commitment to raise the annual investment allowance to an appropriate level will provide the certainty needed for businesses to plan and invest - something badly needed if the UK is to raise its productivity​,” he said.

Innovation and the industry

The government also increased its direct support to innovation – raising the annual budget of ‘Innovate UK’ from £360m (€501.66m) in 2010-11 to over £500m (€697m) in 2015-16 – “to develop a network of centres to help bring innovative ideas to market​”.

But while it was a positive move, access would remain a major barrier, said Moseley. Simplification of the funding landscape to ease access would be beneficial, “not least for small and medium-sized firm who make up 96.5% of UK food and drink manufacturing.

Plans announced to make R&D tax credits easier to access are certainly a step in the right direction​,” he said.

Help with business rates

The government said it conducted a broad review of business rates to ensure the tax system provided stable and sustainable revenues “to fund public services in the least distortive way​”.

As part of its work to strengthen the financial incentives to encourage business growth, the 2015 Budget announced pilot schemes in certain areas - subject to the formal approval of local authorities - which would enable those areas to retain 100% of any additional business rate growth beyond expected forecasts.

"The case for overhauling business rates is overwhelming and it's good to see the government recognise this. Small businesses would like to see the ambitious review deliver tangible reform, not just empty words,​” said Allan.

Economic forecast

In his Budget speech, chancellor of the exchequer George Osborne told the UK government: “Five years ago, our economy had suffered a collapse greater than almost any country. Today, I can confirm: in the last year we have grown faster than any other major advanced economy in the world​.”

The Office for Budget Responsibility (OBR) revised its forecast for UK growth in 2015 from 2.4% to 2.5% and in 2016 from 2.2% to 2.3%. The OBR has forecast growth of 2.3% in 2017, rising to 2.4% in 2019.

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