Budget must get UK SMEs on the right track, says CBI chief

Posted on 4 Mar 2015 by Jonny Williamson

The head of the CBI is expected today to call on the Chancellor to use his final Budget before the General Election to prioritise measures which will create more growth opportunities for medium-sized firms – ‘The UK Mittelstand’, the backbone of the UK economy - while staying the course on the current fiscal reduction plans.

With the economic recovery well-established, the UK’s leading business organisation will urge the Chancellor to take action that will help support business investment and exports, providing long-term stability, certainty and simplifying the tax system – all to support ambitious UK firms.

CBI’s proposals for its Budget Submission include:

  • Making the Annual Investment Allowance permanent from 2016 at £250,000 – to provide stability that will in turn promote investment
  • Boosting the availability of long-term growth capital, by promoting a market for privately placed debt
  • Encourage the full spectrum of Research and Development (R&D) activity to take place in the UK, by enhancing the R&D tax credit to include the final manufacturing of prototypes
  • Fully committing to reduce the Supplementary Charge on North Sea oil producers – to  boost investment plans and create jobs

John Cridland, CBI director general, commented: “Although the economic recovery is well-rooted and bearing fruit, we still need a Budget that locks-in the successes from this Parliament and spends funds wisely on those areas which will keep growth on track.

“This is a good opportunity for the Chancellor before the election to support growth and investment well beyond the Election, providing stability, certainty and simplicity for the UK’s ‘Mittelstand’ to get themselves on the front foot.

“So the Chancellor must reward growing, ambitious firms with the tools to get on with the job of rebalancing the economy and lift productivity. There has been good progress on this front from the Government, and the Chancellor can now take further action to boost investment and innovation.”

To boost investment, CBI is calling for the Government to:

Make the Annual Investment Allowance (AIA) permanent at £250,000 boosting capital spending in plant and machinery. This would cost £670m in 2016/17 before rising to £754m by 2019/20.

Boost the availability of long-term growth capital, the CBI recently outlined in Financing our Future Economy why and how the next Government must promote a market for privately placed debt, which could unlock up to £15bn. In addition the CBI has proposed measures to increase equity investment in medium-sized firms

Reduce the burden on North Sea oil producers by fully reversing the 2011 increase in the Supplementary Charge back to 20%. This would make the UK’s headline tax rates on oil and gas the lowest in the North Sea, alongside The Netherlands.

John Cridland, director general, CBI.

Super-charging innovation

While much has been done to encourage a higher contribution to GDP growth from domestic sources other than private consumption, further steps are needed to rebalance the economy and address the productivity challenge.

CBI is calling for the Government to:

Introduce an incentive that will encourage post-R&D activity in the UK. Boosting the R&D tax credit to include the manufacture of innovations would cost £310m in 2015/16, rising to £372m in 2019/20.

Reducing complexity in the tax system

The UK has made great progress in sending a positive signal about the UK as a place to do business through the Corporation Tax Roadmap, but much more can be done to support growing firms navigate an overly complex system.

CBI is calling for:

A rise in the threshold for firms paying Quarterly Instalment Payments of Corporation Tax from £1.5m to £5m

A reduction in the number of companies caught within transfer pricing rules by increasing the threshold from 250 employees to 500.

A fiscally neutral Budget

With deficit reduction almost at the halfway point, the CBI wants this package of measures to be implemented in a fiscally neutral way. The CBI package costs £0.6bn in 2015/16, before rising to £1.6bn in 2019/20 – excluding the cost of the childcare proposals. These policies should be funded through efficiency savings in the short run and reform of public services over the course of the next Parliament.