Budget 2023 highlights challenges & opportunities

22 March, 2023

Therefore, all eyes and ears were on the Chancellor’s recent Budget statement to see if the Government would increase investment in infrastructure projects. Such increases could lead to increased demand for hydraulic and pneumatic systems used in construction and transportation. Equally, the sector was looking for the government to offer tax incentives for businesses investing in green technologies such as renewable energy, which could also lead to increased demand for hydraulics and pneumatics systems that support these industries

So how did the Chancellor do? Chris Barlow, Partner at MHA, says that manufacturers will be buoyed by new incentives to plan and invest. For example, he highlights that the Chancellor has implemented several measures that should allow manufacturers to plan and invest. The full expensing of IT, plant and machinery from taxable profits will provide welcome relief alongside the £1 million annual investment allowance to help manufacturers plan with some level of confidence for the first time in a while.

However, he highlights that there were some missed opportunities such as not correcting the previously announced measures to reduce R&D relief for SMEs. He explains that while companies which invest most heavily in R&D expenditure will be eligible for further relief the majority of SMEs will be disappointed that previously announced cuts will remain. Additionally, he explains that the 6% rise in corporation tax, while well trailed, is a missed opportunity to release the tax burden felt by manufacturers. More importantly, the failure to reduce the tax does nothing to make the UK more attractive compared to our European counterparts.

Specific infrastructure announcements were also not forthcoming which seems obvious after the Government spent the preceding week to the budget announcing several major transport project delays and reprioritisation. Indeed, many of the announcements in the actual budget itself had no confirmed dates and most likely won’t come into effect until post the next election. So, it was disappointing. The most positive outcomes of the 2023 Budget were measures to tackle the UK’s labour shortages and the so called ‘returnerships’ with skills boot camps and sector-based work academies which MHA’s Chris Barlow says seems to be a call to over 50s who have left the workforce early. In this respect, the budget was good news - any new measures to reduce the longstanding manufacturing and engineering skills shortage is a step in the right direction.

As the Budget highlights, these are interesting times and 2023 will be a period of both challenges and big opportunities, which is why I am extremely pleased to take the helm of Hydraulics & Pneumatics at such an exciting time

Aaron Blutstein, Editor