Machine tool manufacturers reacted with disappointment to the Budget’s one year extension of 40% capital allowances for small and medium sized firms.
The Machine Tool Technologies Association’s president, Mike Legg, said the Budget had done ‘nothing to encourage investment in the high technology equipment necessary to improve productivity’. The MTTA had wanted to see the rate of capital allowance rise to 100% and made permanent. It has been 40% since last year.
Capital allowances alone are not enough to make companies start investing again, according to some in the industry. BSA Tools chairman Keith Bailey said: ‘Anything helps, but this is not significant enough to put right the lack of investment in the UK.’
Capital allowances only apply to profitable companies. Industry leaders point out that as companies are less likely to be profitable during a recession, the likely benefits are reduced.
Glyn Ridley, managing director of Cardinal Broach, believes companies will start to lay off trained engineers. ‘There should have been something in the Budget to help firms keep employees employed,’ he said.
The consensus in the industry is that only a cut in interest rates and a cut in the value of the pound will give firms confidence to start investing again.