Businesses are calling on the government to take measures to further incentivise business investment and tackle labour shortages in next week’s Spring Budget.
Chancellor Jeremy Hunt is unlikely to have significant scope for major tax cuts given the constrained fiscal position, but businesses are hoping Hunt will announce further measures to boost the economy.
In the Autumn Statement Chancellor Jeremy Hunt made the ‘full expensing’ permanent, a move which he described as “the largest business tax cut in modern British history”.
Full expensing allows firms to effectively write off the cost of capital investment against their annual profits. The government said for every pound a company invests, business taxes are cut by up to 25p.
According to BDO, more than a third of businesses (37 per cent) said the full expensing policy has helped their business since Autumn, with firms in the tech, media and construction sector reporting the biggest impact. However, experts said more could be done.
“Confirmation that the full expensing regime is now permanent was a welcome step in providing some certainty that supports long term investment decisions,” Portia Pierrel, capital allowances lead at PwC UK said, “(but) there are additional options open to the Chancellor.”
Pierrel said the Chancellor could expand the range of investments on which full expensing applies in the Spring Budget. Hunt could also look to offer greater investment incentives to loss making businesses.
Alongside encouraging investment, over a third of businesses (36 per cent) want the Chancellor to announce more support for resolving staff shortages, according to BDO. This could include reforming the apprenticeship levy or introducing support for working parents.
Paula Letorey, workforce partner at PwC, said the Chancellor could offer incentives for employers taking on workers from groups of the population where workforce participation is low.
“There is a need to close the gap. Convincing older workers to return to work could help businesses deal with labour shortages fast as well as filling vacancies with experienced staff,” she said.
Richard Austin, partner at BDO, said the Budget could be the government’s “last chance” to lay out plans for the business community.
“Clear and targeted improvements in the tax system, coupled with better support around skill shortages and improved access to capital, could provide a real turning point for businesses that are struggling to grow,” Austin said.