As ICAEW chief executive Michael Izza points out in his Budget wish list letter, businesses are cash rich and he urges the chancellor to take the opportunity to inject optimism into the slowing economy through the new industrial strategy.
“Despite the lack of certainty on Brexit, the economic conditions for capital investment remain positive and this should help drive growth,” he writes.
“But currently, businesses are conspicuously reluctant to make major capital investments; they must again see good reason to invest in technology, training and development, as well as new products and services.”
Izza would like to see radical action from the Treasury over financing growth in small innovative businesses that need the cash upfront, alongside tax reliefs and grant money, “Our future competitive advantage will lie in our ability to produce – and fund – world-beating products”.
Both the British Chambers of Commerce (BCC) and the Institute of Directors (IoD) suggest the introduction of a temporary, “Brexit special”, annual investment allowance cap increase to £1m (currently £200,000) to incentivise business investment, productivity and growth.
BCC director general Adam Marshall thinks such a “big bold incentive” would persuade more firms to stop playing a wait-and-see game and invest, while IoD director general Stephen Martin says that business leaders are optimistic by nature and will grasp every opportunity to grow their businesses.
“But the government has a responsibility to help develop the right environment,” he tells Hammond. “Brexit is not an excuse for domestic inaction but a jolt to make politicians enact reforms to boost the UK’s economic competitiveness.”
As well as boosting investment, there are a number of calls from business organisations for the chancellor to focus on reducing business costs. Top of the list – and vociferously supported by the Federation of Small Businesses – are business rates and the need to keep them under control.
The beginning of November marked “seven months of business rates chaos”, following the “bruising” revaluation in April, said FSB national chairman Mike Cherry.
“In that time we’ve had the staircase tax, chronic delays to relief measures, a disastrous new appeals platform and now an RPI-linked increase in bills. The business rates regime is nothing short of a living nightmare for millions of small firms.
“The chancellor must put an end to the staircase tax at the Budget and ensure that each of the emergency reliefs announced at the last Budget are in place by 22 November. Four in 10 councils are yet to pass on their share of the £300m business rates hardship fund to struggling small businesses. After seven months, that’s ridiculous.”
The FSB is not the only organisation to call for the end to the link between business rates and the largely discredited and outdated Retail Prices Index (RPI).
The CBI also wants to see the change to the Consumer Prices Index (CPI) brought forward. Director general Carolyn Fairbairn says this is important given the heightened economic uncertainty at the moment. The focus, she tells the chancellor, must be on incentives to invest today, not postpone until tomorrow.
“To unlock investment in the UK’s factories and high streets, business rates should be aligned quicker with CPI, not RPI, and equipment investment excluded,” she adds.
The IoD would like Hammond to expand the business rates reliefs already available to microbusinesses in premises with a rateable value of less than £15,000. It wants the threshold for the rateable value to rise to £100,000.
It would also like the chancellor to simplify and liberalise reliefs relating to the Enterprise Investment Scheme, Seed Enterprise Scheme and Venture Capital Trusts. This would offer another way of incentivising investment in start-ups and scale-ups.
“We know the chancellor has a difficult balancing act to perform, but among all of the loud voices crying out for more help, we urge him not to ignore the businesses feeling hesitant about their investment decisions,” Martin says.
“Our surveys show that businesses are not immune to their political surroundings and confidence cannot be taken for granted.”
Hammond must also take action to ensure that the government’s infrastructure plans get put back on track. Fairbairn points out that over the last 10 years, the UK has fallen to 27th in the World economic Forum’s infrastructure quality rankings which is un acceptable.
In particular, she wants to see the government maintain timely progress in delivering the Heathrow expansion and push ahead with its Crossrail 2 and Northern Powerhouse Rail projects.
The BCC agrees. It also wants a commitment to ensuring complete voice coverage on mobiles by 2020 and more investment in the road network.
And last, but not least, none of the business organisations want to see any major changes in the tax system right now. Rather, as ICAEW urges, government attention should be on ensuring a successful roll-out of Making Tax Digital and making the necessary changes to accommodate Brexit.
Once Brexit has happened though, that would be a good time to initiate a radical and comprehensive review of the tax system to make sure it works for the digital age.