Businesses call for one Budget not two fiscal events
Manufacturers are calling on the Chancellor to reform the UK’s business taxes and create one annual fiscal event, rather than the current Budget and Autumn Statement
Over half of companies said frequent changes to tax policy and incentives in the last three years made it more difficult to plan investments and it was difficult to understand and apply tax reliefs and exemptions, revealed a survey of businesses conducted by Make UK and RSM.
Almost half (44%) said that the current system was unfavourable and more than a quarter believed it was worse than China and other major competitors.
It called for the Chancellor Jeremy Hunt to set out a long-term investment programme and criticised the timing of tax announcements, which are often changed twice a year due to the spring Budget and the Autumn Statement. Both fiscal events are used to set out new policy which causes confusion and creates uncertainty for businesses.
‘We cannot continue with the current flip flopping and policy inconsistency if we are to shake the economy out of its current anaemic state and promote long-term growth. Government must start by conducting an urgent MOT of the current unfavourable regime to make it work for, rather than against, business,’ said Fhaheen Khan, senior economist at Make UK.
‘Manufacturers were clear that many aspects of the current tax and regulatory system were not fit for purpose and failed to promote the vital investment in skills, capital and green growth. This is not helped by the fact we have two fiscal statements a year which hampers business planning.’
Companies stated that frequent changes to policies on investment and research and development (R&D) incentives in recent years have hampered business investment plans – just 8% of companies say tax and regulation have no impact on investment decisions.
Reforms should look at measures, such as business rates, R&D tax credits, the apprentice levy and the capital allowances and full expensing system, and whether they are fit for an economy undergoing huge transformational change and in need of long-term investment.
RSM head of manufacturing Mike Thornton said: ‘The correlation between tax and regulation and economic growth is clear. Yet UK manufacturers find the current framework a burden and unfavourable - putting the UK industry at a competitive disadvantage globally.
‘Long-term commitment to generous and accessible incentives, and simplified regulations, are key to boosting future investment, productivity and skills.’
Both physical and digital infrastructure investment were crucial to meeting the manufacturing industry and its employees’ needs, with 36% of companies stating the business environment was central to a modern industrial strategy.
However, the quality of road infrastructure was cited as bad or very bad by 44% of respondents, and nearly half (46%) said the same about rail infrastructure, which rose to 55% in the north before the HS2 leg to Manchester was cancelled.
Geographic economic incentives, such as special economic zones, freeports or investment zones varied in their benefits, however, most UK manufacturers (62%) were not based in any special economic zones, and 73% were not willing to relocate to these zones, and less than a third of industry believe they were an effective means of generating economic growth.