Budget changes and carbon reporting top the agenda at the Southern Manufacturing Forum

Manufacturers from across Sussex, Surrey and Hampshire gathered for the latest meeting of the Southern Manufacturing Forum, hosted by Kreston Reeves and Lloyds Bank, just a week after the Budget.

Launched in May, the Southern Manufacturing Forum brings manufacturers and their advisers together to talk through the challenges they share. True to that format, the presentations were punctuated by table discussions, giving business leaders the chance to compare notes on everything from process improvements and recruitment to investment plans and customer demands for carbon reporting data.

Kreston Reeves Corporate Tax Director James O’Leary opened with a whistle-stop tour of the Budget, before turning to the tax strategies manufacturers should be considering. Kreston Reeves ESG Advisor Dan Firmager then looked at what environmental, social and governance (ESG) issues mean for the sector.

A brighter outlook for R&D relief

R&D tax relief has had a difficult few years, with new rules, a less generous benefit, more paperwork and a sharp rise in HMRC enquiries. James explained that the tide may now be turning. From April 2027, first-time claimants will no longer need to notify HMRC in advance, with claim forms being simplified and HMRC itself has begun actively promoting the relief.

He reminded manufacturers that the relief is not just for laboratories. Improving a process, reducing waste or making a system more efficient can qualify. Nor does a project need to succeed: genuinely trying to resolve technical uncertainty is what counts.

Holding on to key people

With recruitment and retention a recurring concern around the tables, James highlighted employee share schemes as a way to reward and retain engineers, production specialists and future leaders. Tax-advantaged schemes such as Enterprise Management Incentives are welcomed by employers and employees. The Budget widens the options further, renaming CSOPs as EMI2 and doubling the individual option limit to £120,000.

Planning an exit

The tax session closed on succession and exit planning. The lifetime limit for Business Asset Disposal Relief falls from £1 million to £500,000 after April 2027, which may bring some sale timetables forward. The new Founders’ Relief offers a 10% rate on up to £10 million of gains, but James cautioned that the proposed qualifying conditions, including demanding growth targets, mean few businesses are likely to benefit.

Your customers will ask for carbon data

Dan urged manufacturers to see ESG as a commercial opportunity rather than another item on an overflowing to-do list. Tenders now routinely allocate around 5% of their marks to ESG, lenders look favourably on strong credentials, and carbon costs are increasingly being levied at the border.

The EU’s Carbon Border Adjustment Mechanism (CBAM) is already live, and a UK version begins on 1 January 2027, applying to businesses importing more than £50,000 of goods such as steel, aluminium and cement over a rolling period. Meanwhile, new UK sustainability reporting standards will require listed companies to report emissions from their supply chains, and they will turn to their suppliers for the data.

His advice was to start with a materiality assessment: a simple exercise to identify the ESG issues that matter most to customers, lenders and staff, and focus effort there. The goal, he said, is to be the supplier customers choose today and keep for years to come.

Register your interest

You can sign up here to be the first to know the details of our next Southern Manufacturing Forum in early 2027. To find out more about any of the topics discussed, contact Dan, James or a member of the manufacturing team here.