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World Engineering Day – Technical Due Diligence, a Sustainable Future for Industry

Technical Due Diligence

In this joint article, Financial Director Andrew Millington and Senior Consultant Tom Leach look at the future of UK industry and manufacturing.

Posted

21.12.2023

Written by

Andrew Millington Tom Leach

Financial Director Andrew Millington investigates how businesses can utilise tax relief incentives to future-proof their assets and operations and looks at the importance of balance sheet protection following on from a capital expenditure project leveraging the 100% expensing incentives.

Senior Consultant Tom Leach looks at innovational industrial strategy and effective Asset Management and how Finch Consulting can assist businesses through Technical Due Diligence audits on new equipment and systems to ensure the longevity of machinery.

With the recent announcement by the Chancellor that full expensing is here to stay for a while longer, businesses will be looking to bolster their infrastructure as the UK continues to work towards growing the economy and building a more sustainable United Kingdom.

The 100% expensing allows businesses to claim up to 100% of any capital investment in plant and machinery. In addition to this, businesses can also claim 25% back in corporation tax for any investment into their IT, machinery, or equipment. The time has never been better to grow and future-proof your business.

With the continued instability around the energy market and the latest price cap ending in January 2024, many organisations are striving towards Net Zero, looking to achieve both a reduction in carbon emissions and financial security by removing some reliance on variable energy tariffs.

While the taxation break allows for large capital investment in infrastructure equipment such as Solar PV, Solar Thermal and Air Source Heat Pumps, businesses can also look to improve the efficiency and resilience of their process machinery. With some heavy industries still operating inefficient heritage electromagnetic motors and energy-intensive systems, the time has never been better to get ahead of the curve and gain control of your equipment.

Ensuring that new equipment is fit for purpose and suitable for application is a vital part of any CAPEX project, not only to ensure that the equipment delivers a sound return on investment but also ensuring that the equipment is safe, compliant, adopted effectively by the workforce and adhering to UK legislative requirements.

Technical due diligence audits play a pivotal role in assisting businesses to deliver projects from start to finish through the following areas.

  • Design verification – Ensuring all designs are suitable and compliant whilst also delivering an element of equipment resilience and redundancy. A key driver to lead to a more sustainable UK is to build for the future and not for short-term goals.
  • Equipment selection – Selecting the appropriate equipment is vital in ensuring operational stability. Historically, when there is a high demand for a new piece of technology, the market can be flooded with inferior equipment which is early in its development. Buyers should be mindful of the pitfalls of purchasing such a piece of equipment concerning the financial implications and business interruption that often follows.
  • Project delivery and management – Ensuring project delivery is within budget, on time and of the required quality to minimise operational and financial disruption.
  • Modifications – Whether installing an entirely new system or modifying an existing system, the equipment will need to be compliant with the Supply of Machinery (Safety) Regulations 2008 (SoMSR) and the Provision and Use of Work Equipment Regulations 1998 (PUWER).
  • Commissioning – Verifying commissioning and testing of new equipment and systems by undertaking FAT (Factory Acceptance Testing), SAT (Site Acceptance Testing), UAT (User Acceptance Testing) and IST (Integrated Systems Testing) can identify defects that will manifest in the commissioning and testing environment which if detected early can save unnecessary breakdown and replacement cost further down the line.
  • Asset Management – The delivery of a new piece of equipment is only the beginning. Designing, and implementing an effective asset management plan will ensure that the new equipment operates efficiently and safely for its optimum design lifecycle.
  • By ensuring equipment is maintained per the OEM (Original Equipment Manufacturer) guidelines and implementing a robust spare inventory considering elements such as supply chain complications post Brexit, lengthy lead times, component obsolescence and short-, medium-, and long-term operational expenditures associated with running an asset. Businesses can further protect their project investment safeguard their future operations and avoid unexpected repair or replacement expenditures.

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