Budget must encourage business investment, Chancellor is urgedMar 05, 2012
The move would drive economic growth, says the ICAEW, whose recommendations are also intended to help to rebuild business confidence, essential to sustaining and accelerating the UK’s recovery from a year of slow growth.
The ICAEW/Grant Thornton Business Confidence Monitor published last month showed that businesses expect capital investment to grow by only 0.9% over the next 12 months.
Additional ICAEW research also shows that 64% of companies are holding on to cash and that 30% of businesses with no current cash surplus intend to create one this year.
This is suggesting a caution among businesses that must be worrying for government when attracting new investment is so critical.
ICAEW is urging Mr Osborne (pictured) to abandon plans to reduce the Annual Investment Allowance from £100,000 to £25,000 when real business investment has only grown by 1.1% in the last year, compared with the Office of Budget Responsibility’s forecast of more than 8%.
Pippa Bourne, the ICAEW’s East of England regional director, said: “At a time when businesses in the region should be investing some of their reserves in their economic future, Government is cutting back on the allowances which encourage them to do so.
“That is why we think the Chancellor should retain the Annual Investment Allowance and send a signal to businesses that they can feel a bit more confident about the economic outlook.”
ICAEW is also calling on government to take additional steps that will accelerate improvements in the levels of service that businesses receive from HM Revenue & Customs.
As one of the primary points of interface between business and the state, HMRC continues to struggle and is affecting businesses’ ability to ‘get on with the job’. Simple measures such as more use of e-mail and quicker responses to postal queries could make a significant difference, they say.
Mrs Bourne said: “Every extra hour that a small business spends dealing with HMRC is an hour that could be invested in growth. Poor levels of service at HMRC create a burden on businesses of all sizes, especially SMEs.
“Even HMRC has admitted that it does not have enough people with the right skills in the right place. Government must ensure that it gives HMRC the resources it needs to collect tax and support business.”