The role of Government in optimising growth
During the survey and follow up interviews, businesses mentioned several main
areas where the industry requires the Government to provide a positive business
environment in order to maintain its performance and encourage sustainable
growth.
They are:
Tax system
Food and drink manufacturers identified the tax system as the main area in which
the Government can provide support. Despite Government plans to gradually
reduce
the main corporate tax rate from 26% to 23%, businesses believe the UK tax
system is not competitive enough and faces strong competition from both
developed and
emerging markets.
Currently UK's corporation tax rate is on par with the average of OECD
countries, but countries such as Ireland, Poland, Slovakia and Romania have
much
lower
corporate tax rates.
Regulations and 'red tape'
Another area where businesses would welcome Government involvement is in
reducing the burden of EU/Government imposed regulations and 'red tape'. SMEs
in
particular, do not have the
resources to deal with the administration required to comply with regulations.
Moreover,
businesses would like Government to push for a uniform implementation of EU
regulations across Europe, as they believe that the UK is an early adopter of
EU
Directives compared to some
countries where regulations are not enforced, which puts the UK FDM at a cost
disadvantage.
Businesses view compliance of 160 labour regulations as costly and have
emphasised the
importance of flexible and streamlined regulations in order to help
manufacturers grow and
in turn maintain employment levels.
Export incentives
In many cases, FDM businesses and SMEs in particular are not aware of the
end-to-end actions they need to take in order to export. They also require
administrative support to navigate through
the regulations of the countries they are planning to export to. SMEs requested
a greater level of
support for their export efforts.
Specifically, Government bodies could be better at providing SMEs
with more effective guidance and advice on the technical, administration and
logistics processes
associated with exporting to specific countries.
During interviews, FDM executives mentioned that other countries are better at
supporting their
manufacturers to participate in international trade fairs. In contrast, they
perceive that the UK
Government is not providing sufficient marketing support. As a result, there is
a perceived lack
of enthusiasm in the UK stands and the UK is under-represented at international
food fairs
compared to other EU countries such as Germany, Italy or even smaller countries
such as Greece.
Education and training
Education reform (focused on improving the quality of primary and secondary
education and
making courses more relevant for the business world) is of major importance to
the FDM sector
as a means of gaining improved and appropriate access to skills. Businesses
would also like to
receive Government support to revitalise apprenticeship schemes which they
perceive as essential for securing a future workforce with industry-specific
skills.
In this context, the Government pledge to increase apprenticeships across
industries by 250,000 until 2015 and FDF's initiative of doubling food and
drink
manufacturing apprenticeships in England and Scotland will contribute towards
securing some of the pipeline of new recruits necessary to replace the ageing
workforce.
R&D and innovation
Businesses would also like the Government to reform R&D tax credits and tax
breaks in order
to offer better access to funding and promote innovation. SMEs find the process
of claiming
R&D tax credits burdensome and have to bring in external consultants to
help
them submit
applications. Moreover, FDM companies may not qualify for R&D tax credits
or
tax
breaks as
authorities do not recognise the type of innovation specific to food and drink
manufacturing.
Therefore, FDM businesses have expressed their desire for support from the
Government to
widen the definition of R&D activities to include improvements in products,
technology,
packaging, not just blue sky research which is rare in food and drink
manufacturing.
In addition, they believe that Her Majesty's Revenue and Customs (HMRC) staff
would benefit
from specialist training to understand the type of innovation taking place in
the food and
drink industry and, therefore handle claims more effectively.
Trade barriers and food security
FDM businesses highlighted the need for the Government to re-engage in
discussions with
international organisations for the removal of trade barriers to help grow
exports and reduce the
cost of raw materials imported. Moreover, they expressed the need for a food
policy that clearly
addresses long-term issues such as food security and measures to shield the UK
FDM from
commodity price volatility.
Balance of power in the supply chain
Businesses would welcome Government support in the enforcement of the UK
Groceries Supply Code of Practice. They believe that in order to ensure
fairness
and
competition, the Government should monitor not only the food price paid by the
consumer, but also take into account unfair trading practices.
top
More Information
A Grant Thornton report commissioned by Food and Drink Federation. Note that the
case studies in the executive summary were written by the Food and Drink
Federation.