TOOLING FIRMS FEAR HIGH RATES

Machine tool manufacturers fear that last week’s budget boost for investment by industry could be wiped out by higher interest rates and the ever increasing rise of the pound. Last week, chancellor of the exchequer Gordon Brown doubled the rate of capital allowances for investment in machinery and plant during the next 12 months to […]

Machine tool manufacturers fear that last week’s budget boost for investment by industry could be wiped out by higher interest rates and the ever increasing rise of the pound.

Last week, chancellor of the exchequer Gordon Brown doubled the rate of capital allowances for investment in machinery and plant during the next 12 months to 50% for firms with a turnover under £11.2m.

The move will help the UK’s machine tool industry, whose recent boom has just begun to plateau.

`For the first time in many years, we have a chancellor who seems to recognise the importance that investment in industry has on the whole economy,’ said Malcolm Taylor, president of the Machine Tool Technologies Association.

According to Government predictions, the machine tool industry can expect to see investment of about £230m in 1998-99, and £170m the following year by small and medium-size businesses.

`Capital allowances are a good thing,’ said Keith Bailey, chairman of Birmingham-based machine tool company, BSA Tools. `We have been campaigning for them for years.’

While many manufacturers believe that the rise in tax relief is sufficient, they think that if it increases any more, there will be such a surge in capital expenditure that British capacity would not be able to cope and orders would go to rival importers.

Despite last week’s fillip for the industry, spiralling consumer spending is a greater worry to the machine tool manufacturers as it is likely to be checked by higher interest rates.

This will not only increase the cost of borrowing, but accelerate sterling’s already high value.

`The chancellor really has to address the rise in sterling,’ said Bailey. `The pound has risen 15% in recent weeks, I can’t afford margins like that.’

Budget hits exports, page 8