Engineering bodies slam Budget cost hikes

Trade bodies representing the engineering sector have criticised last month`s Budget, saying that it will place an extra cost burden on manufacturers and deter them from investing in their businesses.

Martin Temple, director-general of the Engineering Employers Federation (EEF), welcomes the research and development tax credit and measures for small businesses introduced in the Budget, but he adds that these measures will "provide minimal benefit compared to additional costs of over £3bn a year, which will result from the 1% increase in employers` National Insurance contributions.

"UK manufacturers will be dismayed at this further hit on their costs as they fight to capitalise on the opportunities of the recovery," Temple says. "£3bn of extra costs is £3bn less to invest".

The EEF had wanted the Chancellor to resist tax hikes on business and to alleviate cost increases, including reviewing the Climate Change Levy and reducing Insurance Premium Tax.

Another industry group, the Engineering and Machinery Alliance (EAMA) which represents eight trade associations in the manufacturing sector, has also criticised Chancellor Gordon Brown. EAMA chairman Mike Legg condemns the Budget as "another lost opportunity".

The EAMA says its member associations "felt betrayed" by the Chancellor because he had "ignored the importance" of manufacturing SMEs to the economy. The Chancellor wants higher productivity but there was little in the Budget to stimulate the required investment, just increased costs resulting from the NI hike, according to EAMA.

Like the EEF, EAMA welcomes the R&D tax credits but is disappointed by the amount of money committed to the scheme. Little of the money will reach the SME sector, it says.