Manufacturers said that they wanted the Chancellor to use the forthcoming Autumn Statement to boost investment planning by business.
The survey published by Make UK and RSM sets out a daunting challenge to reform the UK regime of business taxation and regulation, with almost half of companies believing the current system is unfavourable and, more than a quarter feel is worse than China and other major competitors.
The survey also found that companies are reporting that the ‘flip flopping’ and frequent changes to policies on investment and R&D incentives in recent years have hampered business’ investment plans. As a result, Make UK is urging the Chancellor to announce that there will be just a single annual fiscal statement from now on.
Reforms would look at measures, such as Business Rates, the research and development (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 encouraging, or hampering, long-term investment in capital, innovation, skills and moves to net zero.
The report’s findings also support the view that an industrial strategy which encompasses reform of the current business tax and regulation system would lead to greater investment in labour and skills, R&D and decarbonisation.
Commenting Fhaheen Khan, Senior Economist at Make UK, said, “Manufacturers are clear that many aspects of the current tax and regulatory system are not fit for purpose and are failing 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 investment planning. 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.”
According to the report, almost half of companies (44%) believe the UK has an unfavourable business tax and regulatory environment, with less than a fifth (18%) believing it to be favourable. On balance, manufacturers say the UK is worse than its competitors with more than a quarter (28%) believing it to be less favourable than China. Over a quarter (27%) believe it is worse than the US, Germany (26%), France (23%) and Italy (21%).
Conversely, manufacturers believe that a more favourable environment with the simplification of incentives, tax and regulations would ease the burden on business, while more than half (54%) believe that frequent changes to R&D and investment incentives over the last three years have made it more challenging to plan investments. By contrast, fewer than a fifth (16%) felt the changes had allowed their business to increase investment.
The most effective policy tools to promote investment and growth were capital allowances for plant and machinery (73%), R&D tax credits (65%) and a competitive Corporation Tax system (59%) while more than half (55%) believe the current policy of full expensing should be made permanent.
The survey also shows manufacturers believe an industrial strategy would have clear benefits with more than two thirds of manufacturers (67%) saying it would lead to greater investment in labour and skills, almost two thirds (61%) saying it would aid investment in R&D and almost half (45%) saying it would support investment in de-carbonisation and net zero.