Businesses face mounting economic uncertainty in light of the UK's fluid political situation, and as we head into 2020 with a new government in place, it is vitally important to outline what measures will enable this region to prosper now and into the future. In coming weeks, Business West will set out 5 key priorities to help improve the lot of businesses of all sizes to reignite the country’s stagnating economy, and the third of these priorities in focus is business costs and investment.
Where are we now?
Among G7 countries, the UK has averaged lowest for total investment as a percentage of GDP for 30 years, meaning businesses are investing less in product development, improving processes or adopting new technologies than their overseas competitors.
In the South West business confidence has declined throughout 2019, Brexit uncertainty has undoubtedly taken its toll, but rising costs have also negatively impacted on business cash flow and investment, with 45% of businesses in the region reporting increased overhead costs in the last quarter.
We have some of the highest recurrent property taxes in the world as a share of the economy, more than twice the OECD average, and many businesses, particularly those in Bristol where employment land it as at a premium, complain of rising rents.
Lack of access to external finance is also a barrier to investment, with 21 per cent of businesses across the UK citing this as an issue when funding new and innovative activities.
Hence, as a result of the lack of action when it comes to costs, taxes, finance and uncertainty around Brexit, cash flow has weakened for approx. 30% of businesses across the region during the last year.
Where do we need to be?
• Exceeding the research and development investment target of 2.4 per cent of GDP by 2027.
• Lowering recurrent property taxes as a proportion of GDP to below the OECD average - with a particular emphasis on business rates.
• Attracting record flows of foreign direct investment into the real economy.
• Exceeding G7 average of total investment - both public and private investment - as a share of GDP by 2027.
For any business to compete globally, they need a competitive footing at home on which to stand - and the confidence to push ahead.
In the UK, action is required to stimulate the economy and send a strong message that we remain a great place to do business.
Similarly, easing the cost of doing business would help UK businesses to invest, recruit and grow - particularly during this time of uncertainty.
How do we get there?
Priority actions for the next UK government:
•Extend the £1 million Annual Investment Allowance for a further two years and widen its scope.
• Commit to protecting tax relief schemes that incentivise investment - the Seed Enterprise Investment Scheme (SEIS) and the Enterprise Investment Scheme (EIS).
• Reverse the 2017 reduction in the dividend allowance, which is hurting small businesses and sole traders.
• Launch a business-led review of the business rates system in England.
• Introduce a moratorium on measures that increase business costs for the next term of parliament, excluding only evidence-based changes to the National Living Wage.
• Enable the British Business Bank to play a greater role in the provision of patient capital by upscaling the British Patient Capital programme to enable long-term investment in businesses across the UK.
• Commit to keeping the VAT rate for items considered to be ‘energy-saving materials’ at five per cent or lower post-Brexit.
• Expand the British Business Bank to play a greater role in improving the quality and reach of early-stage finance to high-growth businesses beyond London and the South East.
• Ensure sufficient supply of well located employment land.
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