CBI: Budget must tackle Brexit uncertainty
Written by Deborah Ritchie
In its pre-Budget letter to the chancellor, business group the CBI has focused on three key areas it says are key to unlocking growth: reforming business rates to ensure firms can invest and grow, building on recent announcements to make the apprenticeship levy work; and improving capital allowances to drive investment – particularly in digital and low carbon technologies.
CBI director-general, Carolyn Fairbairn, says these three areas will set the UK on the right path, increasing the country’s competitiveness and attracting more investors, lifting productivity and sharing prosperity -- particularly important as the UK currently has the lowest level of business investment as a proportion of GDP in the G7, with the gap widening even further.
Increasing the annual investment allowance she says will help lift the fog of uncertainty that is holding back investment, while hundreds of thousands of firms need help planning for the changes ahead.
“As we near the end of Brexit negotiations, the world’s gaze is fixed on these shores,” Fairbairn says. “This Budget is a pivotal moment and chance to showcase the UK as an open, collaborative and confident nation. Entrepreneurs here and around the world need to see a UK committed to harnessing the power of business to innovate and tackle problems, from sustainability to inequality.
“With skills shortages, uncertainty and the squeeze in incomes on the rise, this couldn’t be a more critical time to plug the drain on the UK’s productivity and deliver prosperity that is shared by workforces and communities across the country.
“The government must focus its attention on making the UK a shining beacon of enterprise, at the top of every investment league table and known worldwide as a country that attracts, not deters, capital and talent.”
On post-Brexit trade, Fairbairn said it is fundamental that a withdrawal agreement with the EU is agreed. “This will provide temporary but essential relief for firms of all sizes. Then attention can turn to the vital task of finalising our future economic and trading relationship with the EU.
“In order for businesses to navigate the challenges and opportunities of Brexit, they badly need advice and information. The Government should ensure that funds allocated to Brexit readiness are used properly and communicate with business effectively.”
The date for the Autumn budget has not yet been announced, but is imminent.
CBI recommendations (Source: CBI)
• Increase the Annual Investment Allowance to £500,000 for two years to lift UK competitiveness and innovation
• Review the capital allowances regime next year with a focus on newer technology so the UK has one of the most competitive regimes in the G7 by 2030
• Introduce a Business Growth Accelerator to provide a year’s relief from business rates when building or renovating a store, factory or office, and abolish downwards transition so businesses can benefit from property devaluations now, boosting growth around the UK
• Review the business rates model in 2019/20 with a focus on investing in digital, new technologies and energy efficiency
• Double the budget of the Institute for Apprenticeships to £28m to give it the capacity to approve training schemes quickly and efficiently
• Invest in an online one-stop shop of advice and information for businesses about leaving the European Union.
The CBI says its package of proposals costs just over £1.5bn in 2019/20 and £2bn in 2020/21. This accounts for less than 0.2% of official forecasts for government spending.
Tax, regulation and investment
• Commit to deliver the world’s most competitive research and development tax credit by ensuring it accurately captures the breadth of business innovation
• Delay the introduction of off-payroll working rules (IR35) in the private sector until April 2020 at the earliest
• Update the intangible fixed assets (IFA) regime by reversing changes introduced in the Finance Act of 2015
• Commit to review financial services taxation in due course, with a view to establishing a stable and certain tax framework for the future.
• Make it easier for small businesses (SME) to access apprenticeship levy funds by reducing the cap for SMEs from 10% to 5%
• Set out a clear long-term version to introduce a flexible skills levy after 2020, to include life-long learning, ensuring business has ample opportunity to feed in.
• Invest in an online one-stop shop of advice and information for businesses about leaving the European Union
• Continue to allocate resources to HMRC for the expansion of the Civil Service to deal with post-Brexit government functions.
Energy and infrastructure
• Urgently confirm whether the UK will remain in the EU Emissions Trading System (ETS) after Brexit as well as the future of the Carbon Price Floor
• Bring forward planned changes to the company car tax regime to incentivise businesses to invest in vehicles with the lowest emissions
• Close the gaps in existing digital infrastructure provision and clearly outline the UK’s path to a 5G future.