Economic activity since the EU referendum has been more resilient than expected, but the Government must use this month’s Autumn Statement to boost productivity and business confidence
The CBI’s latest economic forecast revised down growth predictions for the next two years.
The forecast predicts slower GDP growth in the next two years at 1.3 per cent GDP growth in 2017, down from 2 per cent in May, and 1.1 per cent in 2018.
The revision is largely due to expectations of lower business investment, dampened by increased economic uncertainty post-referendum. Additionally, rising inflation – pushed higher by the depreciation in sterling – is projected to eat into households’ disposable incomes, further curbing economic growth.
Against this backdrop, the Government should use this Autumn Statement to drive the economy forward by stimulating business confidence and investing for the future.
Supporting business investment
Incentivising firms to invest will mitigate increased economic uncertainty since the referendum. Increasing the Annual Investment Allowance to £1m until the end of 2018 and removing new plant and machinery investments from business rate calculations could make a real difference to firms’ attitude to capital expenditure over the coming years.
Deliver key infrastructure projects
There’s also much more we need to do to ensure that growth, prosperity and opportunity reach all of the UK’s nations and regions. Our infrastructure network is fundamental to this. The Government has made welcome announcements on Hinkley Point and Heathrow.
But with the UK languishing 24th in the world for its infrastructure quality, now is the time to put serious effort into improving our creaking infrastructure. By increasing Public Sector Net Investment to 2 per cent over this Parliament, the Government can play its part in getting spades in the ground – including improving the supply of housing that has lagged behind demand for far too long.
Increase spending on innovation
Science and innovation play an essential role in securing foreign direct investment and driving productivity and prosperity throughout the UK.
Government and business should work together to achieve an ambitious target of 3 per cent of GDP for joint public and private expenditure on R&D by 2025. In its first steps towards this goal, Government should commit to a comprehensive industrial strategy that promotes our competitive advantages – such as in life sciences and automotive – while doubling Innovate UK’s funding and enhancing the R&D tax credit regime.
Close the gap in childcare
Affordability and availability of childcare is often cited as a barrier to getting more parents back into work. Closing the gap between free provision of childcare and statutory maternity pay should be key goals for Government. By offering 15 hours of free childcare aged one and two and extending statutory maternity pay from 39 to 52 weeks, Government can make it easier for parents to stay in work for longer. CBI analysis suggesting that bridging this gap could increase female employment by 2 per cent in the medium-term, helping to increase household income and decrease income inequality.
A pro-enterprise Autumn Statement
With the principles for the UK’s future relationship with the EU still to emerge, successfully delivering on an ambitious domestic agenda has never been more important, with Government and business working together in partnership.
By adopting these proposals and setting out a pro-enterprise agenda, the Chancellor has a golden opportunity to capitalise on our core economic strengths and get all sectors and regions of the economy firing on all cylinders.