Chancellor Rachel Reeves has been urged to make “long overdue” changes to government spending as the Confederation of British Industry (CBI) demanded greater investment in innovation.
The Chancellor has previously said she is willing to “fight” for growth but leading economists have raised the alarm about an incoming recession.
The CBI suggested that an economic boom could come if the government committed to spending 3.4% of GDP on research and development (R&D).
Total spending on R&D for 2022 represented just under 2.8 per cent of GDP, according to Office for National Statistics (ONS) data released last year.
Deep reforms to skills and training funding are essential to driving growth, the business group added.
It advised the government to allow businesses to invest more of their contributions to the Growth & Skills Levy, which replaced a similar apprenticeships levy, on training staff.
Louise Hellem, the CBI’s chief economist, described next week’s Spring Statement as a “pivotal moment”.
“To unlock sustainable growth we must move beyond discussions to accelerate investment through targeted innovation as well as policy and regulatory reforms,” she said.
“With the right actions, the Spending Review can serve as a catalytic moment for hardwiring the Growth Mission into the heart of Whitehall. But for that Growth Mission to succeed government must inject business with a serious confidence boost.”
The CBI also called on Reeves to commit to boosting capital investment by £100bn in the next five years as part of its ten-year infrastructure and industrial strategy.
The Spring Statement will follow a series of surveys showing a slump in business confidence.
One of the CBI’s latest surveys showed that firms were preparing to cut staff as activity in the private sector was forecasted to drop between January and March.
The Resolution Foundation also said in a preview to the Spring Statement that the UK’s fiscal headroom had been wiped out, adding that labour market figures resembled those only seen during a recession.
Treasury ministers have recently met City bosses and regulatory officials in a bid to flip the narrative.
Reeves has recently held talks with executives at Revolut and Zilch as well as officials at the Financial Conduct Authority (FCA) and the Health and Safety Executive.
In an exclusive article for City AM earlier this week, Prime Minister Keir Starmer said the government was setting out a mission to “bring back the animal spirits of the private sector” by clamping down on bureaucracy.
