Growth not giveaways – what business wants from the Budget

Author
Phil Smith
Managing Director | Business West
20th November 2017

For many months now the Brexit negotiations have been in stasis.

While the Government has spent most its time dithering and posturing, Michel Barnier and the EU Commission have spent theirs filibustering and frustrating hope of moving on to discuss what our future trade relationship with Europe  looks like. 

The recent slew of allegations and controversies to have rocked Westminster have added to an atmosphere of crisis and plotting that overshadows the day to day business of governing.

Spare a thought, then, for poor old Philip Hammond, the grey chancellor, who unlike some of his Cabinet colleagues, does not have the luxury of keeping a low profile for he has a date with destiny and a faded red briefcase on 22nd Nov.

Like a trainee paratrooper nervously awaiting his first jump, frantically checking his harness as the jet plane door slides open, Mr Hammond’s date at the despatch box will be a moment of pure trepidation, not knowing if everything will go off without a hitch or come swiftly down to earth with a splat.

The Treasury is under significant political pressure to sign off on a myriad of giveaways to keep the population at large happy in the wake of rising inflation, wage stagnation and falling living standards.

Giveaways that were repeatedly criticised during the general election as being funded by a ‘magic money tree’, now miraculously seem to have made their way onto the agenda.

While I’m sure that many business owners wouldn’t be entirely adverse to their sons’ or daughters’ student debt being capped given the squeeze on living standards, the pressure for populism threatens to ignore the needs of business. Pleasing voters does not often fit well with the boring and long term nature of making the economy grow and businesses thrive.   

Until now, most of the government’s moves have added to business costs. The apprenticeship levy, raising the wage bill and rising business rates. All good in themselves, but without a clear sense of wider economic strategy – of how firms will be supported to grow, innovate, export and succeed – they dampen rather than nurture businesses confidence. 

Surely, the time has come for Government to show its hand and set the foundations of our economy post-Brexit? Will Wednesday be a case of cometh the hour cometh the man?

Quite simply, business patience is wearing thin.

Without question businesses want the best possible Brexit deal, but our members tell us time after time that they feel like they are in purgatory. Ignorance certainly isn’t bliss when it comes to our future trading relationship with our largest trading partner.

Yet, if we don’t create the conditions for growth at home, we won’t be in a position to meet the challenges, or take advantage of the opportunities, of our new place outside the EU.

Sure, we have suffered from a legacy of underinvestment in infrastructure for decades, but key to getting the UK economy on the right track requires a great rebalancing act. 

When we compare ourselves to our global competitors, how many UK industries can we identify as truly world beating? 

Financial & professional services, aerospace & defence, precision engineering and pharmaceuticals all feature. Perhaps, we could add creative industries to the mix, but beyond that where are the genuine, British world-beaters?

To their credit, government has funnelled a great deal of time and money into supporting some of the aforementioned industries, yet in so many other areas, however, enterprise is being neglected or stifled through a lack of investment, over-regulation or both.

Simply put, we are not creating conditions for a productive, high-skilled economy.

It is a constant source of worry that despite possessing some of the world’s greatest universities and attracting some of the highest calibre talent, we still don’t seem able to build an Apple, Facebook or Google for example.

While Theresa May announced at the CBI’s recent conference that the Government’s eagerly, anticipated industrial strategy will be released this month, the Chancellor needs to start to get the house in order to begin to help business, without giving into temptation and announcing a raft of giveaways.

We are fast becoming an upfront cost economy, with ever increasing bureaucratic and cost barriers. 

The government has long banged the drum that lowering Corporation Tax is the solution to boosting business investment. The reality is that the burden of upfront costs and taxes that hit firms before they begin to make a profit hinders business growth and investment far more than the level of tax they’re asked to contribute once they’ve made a profit.

What’s more the Chancellor must take big and bold action to incentivise firms to invest.

At the moment, we’re seeing business investment lag, as firms hesitate to take the plunge while so much uncertainty remains. The Treasury must encourage and support firms to put money back into investment, which in turn will raise wages and living standards for us all. 

Each of these would be absolute imperatives, even if the referendum of June 2016 never actually happened.

So too goes the state of Britain’s business infrastructure.

The business communities I represent constantly lament the shortcoming of the UK’s infrastructure, which doesn’t deliver the quantity and quality of transport and communication connections or housing needed in the right places. 

Too often infrastructure projects get kicked into the long grass, leaving our existing networks under pressure and at over capacity.

The Chancellor must use this Budget to commit to seeing through the delivery of projects vital to our economic success.

The green light for big rail plans, and bringing forward investment in the road network, will go a long way to increasing connectivity to markets, spurring job creation and boosting business confidence. More direct investment in house-building, too, would have a similar effect.

On the other side of the same coin, is investment in our digital infrastructure. I hear all too often from companies in all corners of the region how poor mobile coverage has undermined their productivity and ability to connect with customers and suppliers.

Getting these basics right will be crucial if the UK is to showcase itself as an enterprising and competitive place to do business in the future.

My message to Mr Hammond is this: be brave, but invest in the long term.

Government must be brave and rise above short-term electoral calculation to put our long-term success first. Anything less will be an abdication of their responsibility to the people of Britain - whose prosperity and well-being depends on a thriving and growing economy.

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