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13 November 2017

Incentives 4.0

Incentives 4.0 Incentives 4.0
The adoption of leading-edge technology sometimes needs a helping hand. In the early 1980s, CNC machine tool and robot investment in the UK was given a boost by government grants, for example, but such direct intervention is, well, very ‘80s. Capital allowances that allow the writing off of investment against tax on profits are another way, and they operate to a limited degree here.

But UK machine tool suppliers and users have often looked longingly at Italy, where there has been regular ‘super-depreciation’ of investments, most recently allowing the writing off over five years of 140% of the value of a machine tool investment. And now, for Industry 4.0 technology, ‘hyper-depreciation’ has made an appearance.

Yes, Italy’s government has now got very seriously behind Industry 4.0, turning that 140% into 250% for complying technology – across five years, that’s worth €36,000 on an investment of €100,000 versus a benefit of €9,000 for your run-of-the-mill super-depreciation, Machinery was told on the Citizen Machinery stand at the recent EMO exhibition (p14).

Importantly, the government isn’t just throwing money around will-nilly; there are criteria placed both on the supplier of the technology and on its user. Citizen Machinery’s machines and software are compliant, and the majority of its sales this year in Italy have incorporated Industry 4.0 technology.

First introduced this year, following good GDP and manufacturing sector growth, a further €2 billion of hyper-depreciation support for 2018 has been signalled by the Italian government. Just to put that figure into perspective, public commitment in France is €10 billion, in Germany €1 billion (but with a major push from large industrial giants such as Siemens and Festo driving that country’s adoption), with the USA splashing out €0.5 billion (but with large ICT firms such as CISCO pushing the technology in that case). No figures for the UK were presented to Machinery, because there is no similar government-backed push, although Innovate UK earlier this year said, under the heading of “Government investing in 4IR solutions”, that it had invested over £200 million in the past three years (4IR = fourth industrial revolution).

Now, Italy has a manufacturing GDP of around 16% (UK, 10%) and there are many small manufacturing firms making their own products that the country’s government wishes to support. This country will likely see globalised firms at the top of the food chain adopt Industry 4.0 technology and exert top-down pressure on small- and medium-sized supply chain firms. As for government support of the Italian kind, to use a phrase of the day, companies will likely have to whistle for it.

First published in Machinery, October 2017

Andrew Allcock

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