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.

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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.