The UK is lagging behind the rest of the world. Having led the First Industrial Revolution, the UK is at serious threat of falling behind other countries. This conclusion and worrying state of affairs was presented by the House of Commons Business, Energy & Industrial Strategy committee (BEIS) in its report on the Automation of Work published on 9 September 2019.
It is their assessment of the reluctance of businesses and the government to lead the way in the Fourth Revolution. There has been a general fear in society that ‘robots will take over our jobs’, but BEIS disagrees and concludes that the failure to seize the initiative will result in other countries taking advantage of new technologies, together with the resulting growth and employment opportunities, leaving others in their wake.
Their fear is that as a result productivity will fall, investment will dry up and businesses, investment and people will migrate to other countries that have grasped the nettle and invested in the future.
Is this true? This case may be supported if there was evidence elsewhere of businesses failing through lack of focus on digitalisation and being overtaken by technology. The recent sad events in the holiday and travel industry may be pertinent. When a company fails it is usually due to a complex array of issues, but reportedly Thomas Cook’s failure to keep up to date with technology is likely to be one of the reasons that the business sadly ceased. As has been seen, the ripple effect of such an event is far reaching.
BEIS state that their clear message is that the future of UK manufacturing depends on higher levels of productivity and that it is robotics and automation that hold the key and present the possibilities to enhance productivity, leading to higher production and more jobs in the UK.
Whilst acknowledging that some of the barriers to automation identified by UK businesses are real. BEIS does accept that other barriers stated are simply about perception. They recommend that the UK government does more to work with those who are leading the way with automation, to share information and present case studies of examples of success in order to open the eyes of other more sceptic business owners to the possibilities automation presents.
But this is a competitive world. Every business is seeking to find its competitive edge. Margins are tight. Why would such businesses who are more advanced in their thinking about automation share their knowledge with other businesses? If automation gives them a competitive edge, why tell the competition about it?
Whilst this may be true of businesses in direct competition, there are others in the supply chain. So if a business that is advanced in automation shares knowledge with a supplier that is less automated, that supplier may also improve its processes resulting in improvements in delivery to its customers and potentially a reduction of costs. All other things being equal, sharing such knowledge can have a positive ripple effect across the supply chain and be beneficial to the industry.
In the recent past, there were worries that increased automation will affect employment and that businesses that use robots should pay an income tax charge – effectively recognising that the employees whose ‘job the robot has taken’ would otherwise be paying income tax on their salary. BEIS argue that this step is not logical. Given the low uptake of automation and robotics, imposing an income tax would reduce engagement with automation.
BEIS argue further that the government should introduce a tax incentive for investment in automation and robotics. They recognise the value of the existing system of claiming tax credits for investment in research and development but believe that the government should go further.
Tax incentives are a hot topic for countries in the international community. The pressure is on to equalise and harmonise taxes to ensure that international businesses do not make strategic decisions for tax purposes. This is deemed to be tax avoidance which is frowned upon in many quarters.
So what would this incentive constitute? An opportunity for a business to make a decision to invest in automation with the carrot of a tax incentive. Is this then labelled ‘acceptable tax planning’? Where are the lines drawn?
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