Why tax relief cuts will curb boys toys spend

By Josh Brooks, Thursday 29 March 2007

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As a newcomer to our industry in 2004, my first impression was of a sector obsessed by, and in love with, its kit. As print buyers will know, a visit to any shopfloor will involve detailed descriptions of why the latest gadgetry on the newest press, folder or platesetter makes that company the most efficient, the highest-quality or simply the cheapest.

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Three years on, I still think the industry is a little too fascinated by heavy metal for its own good. But I’ve also learned that investment in new kit is, for better or worse, an inevitable part of a printer’s business cycle.

So it is fair that Gordon Brown has been heavily criticised by manufacturers for his decision, in what will certainly be his last budget, to cut tax relief on capital investment to 20% from 25%. Rather than help print firms respond to the changing market, this will only make things harder. For smaller firms, a hike in corporation tax to 22% won’t help either.

I’m not so sure, though, that the drop in tax relief is all bad news for the industry. Obviously, every print company relies on its kit. But investment for its own sake feeds overcapacity and damages everyone’s margins. Chasing top-line growth by spending big can be a risky strategy. The Chancellor’s last Budget could put the brakes on all but the most essential investment projects.

Moreover, as industry leaders have so often argued, splashing cash on skills rather than a new press, and branching into print-related areas, such as asset management or data handling, are more likely to help the bottom line than increasing capacity.

Love him or loathe him (and many in print fall into the second camp), Gordon Brown’s parting shot might just make you think twice before pulling out the chequebook for the newest and shiniest boys’ toy.


Josh Brooks is deputy editor and news editor of PrintWeek.

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