Capital allowances and export finance moves welcomed by MTA and EEF

Mark Ridgway OBE, MTA president, said: "The Chancellor's move to increase the Annual Investment Allowance (AIA), which the MTA urged, to £500,000 is very welcome. But it has only been extended in duration for one year. The next step must be to make the rate permanent in order to give businesses the certainty they need to invest." The MTA represents manufacturing technology suppliers and importers, taking in machine tools, tooling workholding and software, as well as subcontracting SMEs. The increase on the £250,000 figure, effective from 1 January 2013 for two years, to £500,000 until the end of 2015 is better than had been anticipated, as the AIA was to have fallen back to £25,000 in January 2015. Engineering employers' organisation EEF's chief economist, Ms Lee Hopley, said of the move: "Doubling the investment allowance will offer a big boost to spending on modern plant and machinery. It will capture more of manufacturers' investment on new equipment and technology which are key to a shift in our productivity performance. The OBR's [office for budget responsibility] estimates that this could pull forward £1 billion of investment highlight the significance of the move. "Getting investment going now is critical, but sustaining that is vital too. To build an internationally competitive system when these temporary measures expire needs a comprehensive review of the capital allowances regime." The Chancellor highlighted that the OBR expects investment activity to gather pace this year, with its Budget 2014 forecast revising up annual business investment growth to 8.0% in 2014 and 9.2% in 2015, and he highlighted that the Budget AIA measure "will mean that up to 4.9 million firms – 99.8% of businesses – will receive 100% up-front relief on their qualifying investment in plant and machinery". The MTA also said that the doubling of support for UK Export Finance "is good news", since it has long argued that "UK businesses have been disadvantaged in the field of export finance for too long and the strides being made to address this are overdue". The Chancellor announced a doubling of the UK Export Finance direct lending programme to £3 billion, the cutting of interest rates, plus a reduction the cost of long-distance flights for exporters and visitors to the UK by abolishing two tax bands. And he said that the OBR expects exports growth of 2.6% in 2014, rising to 4.7% in 2015 and 5.0% in 2016. EEF's Ms Hopley said: "Meeting the Chancellor's ambitions on exporting, while challenging, are critical for sustainable growth. A number of changes announced today should support an evolution of UKEF into a business responsive agency supporting a broad spectrum of exporting activity through the supply chain. So long as there are concerted efforts to promote these actions, this presents a win for exporters." The full budget can be downloaded at the link below.