Backing business to drive long-term growth
For UK businesses to the deliver the jobs, growth and investment needed to secure our long-term economic future, they need a competitive environment here at home. However, as we approach yet another General Election, the UK continues to lag behind its international competitors.
While corporation tax is decreasing, businesses remain disappointed at the lack of action on the high up-front taxes and costs of doing business in the UK. Companies continue to face unacceptably high input costs which weigh heavily no matter the stage of the economic cycle, company performance or ability to pay. The new tax year saw firms hit with a raft of changes adding to the upfront cost of doing business, including the introduction of the Apprenticeship Levy, Immigration Skills Charge, and a new National Living Wage.
Despite some improvements, the fundamental unfairness of the business rates system remains, with firms across the country continuing to pay the highest business property taxes in the developed world. In its current form, the business rates system creates a number of perverse incentives for business location, property improvement and plant and machinery investment. Businesses also continue to face significant difficulties in hiring staff with the right skills. The BCC’s Quarterly Economic Survey – the UK’s largest and most authoritative private-sector business survey – confirms that the proportion of firms reporting recruitment difficulties remains close to a record high.
Business communities are therefore calling for the next government to commit to no new up-front business taxes or costs until the end of the next Parliament in 2022 and further, more radical, reform of the broken business rates system. This must include the removal of plant and machinery from business rates valuations which does so much to undermine business investment.
The new government must also do more to protect the long-term health of the UK jobs market, including improving the transition from education to business by guaranteeing universal ‘experience of work’ in all schools for under 16 year olds, and delivering a future immigration regime based on economic need – rather an arbitrary migration target.
Tackling these longstanding issues has come even more pressing with the UK economy set to enter a more challenging period. The first estimate of UK GDP growth indicated that the UK economy suffered a loss of momentum in the first quarter of 2017. With inflation rising it is likely that the Q1 slowdown is the start of a sustained period of weaker growth, as the UK’s over reliance on consumer spending becomes increasingly exposed.
Yet you wouldn’t really know this from reading the various party manifestos that have just been published with political posturing largely put ahead of the need to create the best possible conditions for long-term economic growth. While there were some bright spots, notably promise of further action on business rates and improving digital and mobile connectivity, these were largely offset by proposals for higher personal and business taxes, significant market interventions and cuts in immigration. While business confidence remains relatively strong this may not last if such short-term political thinking is put ahead of securing our long-term economic future.
Tackling these fundamental concerns will help ensure that our economy successfully navigates through a world full of turbulence, both political and economic, and crucially remains a great place to do business through the Brexit process and beyond.