Foreign investors of the likes of e-commerce powerhouse Amazon and logistics firm DPD feature among the big winners of the ‘super deduction’ announced this month as part of the UK government’s 2021 budget.

Capital-intensive businesses across logistics, energy and manufacturing, with cash at hand for fresh investment, are set to reap the benefits of a measure the government considers ‘the most generous’ business tax break in British history. 


“They incur into the hundreds of millions in capital investment annually. A deduction like this could be very appealing and attractive in the context of those numbers,” said Portia Pierrel, a director at PwC. 

The deduction gives firms a 130% capital allowance on plant and machinery investments over the next two years, cutting their tax bill by up to 25p for every £1 invested. It covers the full spectrum of businesses assets from heavy duty machinery and equipment to fire alarms and lighting. 

Although investments before April 2021 are not eligible for the deduction, data from fDi Markets over the past five years may signal who could be the biggest beneficiaries moving forward.

The Amazon effect

Amazon’s unmatched investment drive makes it the prime candidate. Analysis by campaign group Taxwatch, based on the e-commerce giant’s 2019 accounts, suggests the 130% deduction would ‘wipe out’ its taxable profits in the UK. 

The company has aggressively expanded its network of fulfilment and distribution centres across the country in recent years. In 2020 alone, it announced 15 new logistics projects, worth a total of $338m, stretching from Plymouth to Glasgow, fDi Markets data shows. Property is excluded from the super deduction, so while the bricks and mortar of these warehouses do not qualify, but their high-tech interiors do. 

While this has led some to dub the deduction the ‘Amazon tax cut’, the firm is in good company. Logistics companies have also ridden the online-shopping wave and Taxwatch’s analysis reveals that French DPD along with German-controlled Hermes could also substantially reduce their tax bills. In the past five years, no other foreign company has invested more in logistics than Amazon, DPD, Hermes and DHL, fDi Markets figures show. 

Powering ahead

Taxwatch and tax consultants note that the continuous and large-scale capital investments required of utilities makes them another big winner. Of the country’s six largest energy suppliers, three — EDF Energy, Eon and Npower — are foreign-owned. They already feature among the most active foreign investors in the country, allocating billions to develop clean energy sources across the country. In the past five years, France’s EDF invested $2.53bn in renewable energy projects in the UK, while also moving ahead with the preparation works for the proposed 3.2GW Hinkley Point C nuclear power station under construction in Somerset. 

Oil and gas companies are also embracing green energy and are ramping up investment in the sector. Norway’s Equinor has emerged as one of the biggest foreign players in UK renewables, announcing $12bn worth of investments in 2020 alone, including one of the world’s biggest blue hydrogen facilities near Hull. 

Modernising manufacturing

The equipment and machinery used by manufacturing firms gives them broad scope to use the super deduction. “The sector where I’ve seen the most interest in the past couple of weeks is manufacturing,” said EY partner Katie Selvey-Clinton. “The ability to now invest in more production efficiency and modernisation — this is really attractive to them.”

PwC forecasts that manufacturers investing £10m on a new factory would make £1m in tax savings over the two-year super-deduction period.

Foreign firms heavily investing in production capacity include India’s Tata Group, which has expanded its automotive and metals facilities in recent years; Japanese Nissan; and the US’s Exxon Mobil, which has built out its chemicals plants in Wales and south-east England. The German engineering powerhouse Siemens invests in its British manufacturing capabilities almost every year. 

Construction firms are also prime contenders, but only to the extent they purchase, rather than hire, machinery. Builders to watch include Australia’s Goodman’s Group, which invested in a UK project worth at least $500m every year from 2013 to 2019, and the US’s Panattoni which has announced a $500m project every year since 2018.