Tax cuts won’t cut it for UK manufacturing
Posted on: September 23rd 2022 · read
Businesses still need more clarity regarding the energy support package and that yesterday’s interest rate increase from the Bank of England contradicts the government’s economic growth strategy.
Despite the tax cutting announced in the Mini-Budget on 23 September by the Chancellor, the move by the Bank of England to increase interest rates hit the ability of businesses to invest. These mixed messages will act as a drag on decision making over the next few months. The environment businesses find themselves in, despite efforts from the Chancellor, is one where they can’t plan for the next year and because they can’t plan, they can’t invest. This means we’re unlikely to get the growth the government wants.
In this Mini-Budget, we may have witnessed the biggest tax cuts since the time of Mrs Thatcher, but they don’t deal with the biggest problem businesses face: the cost of energy. Today’s Mini Budget still fails to provide the exact details of the energy price guarantee that businesses so desperately need in order to get them through the winter.
While it appears that the price will be less than half of the anticipated wholesale price this winter, prices are still double that of a year ago and there are vagaries depending upon contracts. In the short- term, businesses will attempt to pass on the increases in wholesale prices to their customers and this will affect the wider economy. In six months’, when the cap ends, there will be concern about where the wholesale price will be and this will affect business’ confidence to invest.
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