27 October 2016

  |  CBI Press Team

Press release

Invest for the future - business priorities for Autumn Statement 2016

Businesses are calling on the Government to set out an ambitious pro-enterprise agenda that capitalises on the UK’s core economic strengths.

Invest for the future - business priorities for Autumn Statement 2016

The Chancellor should lay foundations allowing firms to navigate a more uncertain economic outlook, invest for the future and get all regions firing on all cylinders. Rarely has there been a more important Autumn Statement, says the CBI in its submission for 2016.

While the economy has shown resilience in the months since the vote to leave the EU, economic uncertainty continues over the UK’s future relationship with the EU and its impact on firms’ investment plans. In the short-term, the Government needs to stimulate confidence and investment, while over the longer-term, balance productivity growth across all regions with an ambitious plan for infrastructure investment. 

The CBI is proposing:

  • An increase in average Public Sector Net Investment spending this Parliament to 2% of GDP (it is currently forecast to fall to 1.7%) This would increase average annual public investment by £6 billion. Part of this should go to essential local transport infrastructure including through the Local Growth Fund, which was five times oversubscribed in the latest funding round. This investment will drive productivity by increasing the scale of regional labour markets
  • Fast delivery of over £425 billion worth of planned infrastructure investments with clear timeframes and implementation plans, in particular on roads and rail investment including the transformation of the A303/A30/A358 corridor to Land’s End to an Expressway and the dualling of the A1 from Newcastle to Scotland
  • Increase the Annual Investment Allowance – a vital allowance for mid-sized firms - to £1 million until the end of 2018 to increase the attractiveness of near term investment
  • Use business rates to incentivise productive investment – especially from our manufacturers - by exempting new plant and machinery investments from rates bills and bringing forward the RPI to CPI switch
  • Double funding for Innovate UK and super-charge the R&D tax credit system by 50% for firms not only researching, but developing new products here in the UK
  • Commit publicly to a long-term target for R&D spending of 3% of GDP.

Summary table

Carolyn Fairbairn, CBI Director-General, said:

“The Chancellor should capitalise on the UK’s core strengths, setting out a pro-enterprise agenda that instils confidence and kick starts investment.

“With huge variations in productivity between different parts of the country, the top priority must be to set out a programme that will get our regions firing on all cylinders and supports businesses to innovate, invest and create jobs in the years ahead.

On driving business investment:

“Amid economic uncertainty, it’s important that the Government does what it can to incentivise businesses to invest today, rather than postpone until tomorrow. Increasing the Annual Investment Allowance to £1 million until the end of 2018 and removing new plant and machinery investments from business rate calculations would make a real difference.

On infrastructure:

“With interest rates at rock bottom, now is the time for the UK to put serious effort into improving our creaking infrastructure. We would like to see £6 billion more spent each year on public investment: improving our transport and digital network, building more homes and extending regional funding. This can be achieved by increasing Public Sector Net Investment to 2% and delivering on previous infrastructure project commitments.

On innovation:

“If the UK is to be at the top of the global game on business innovation, we need a comprehensive Industrial Strategy that capitalises on the UK’s core economic strengths. We should also embolden those firms who not only carry out research for new products in the UK, but also develop them here by enhancing R&D tax credits by 50%.

On tax and regulation stability:

“A stable and competitive tax system is vital to the UK maintaining its international reputation as a great place to do business. To create stability, the Chancellor should set a high bar for tax changes, focussing on targeted measures that address the current economic challenges: supporting investment and productivity growth.”

The CBI’s proposals carry a total cost of around £11.5 billion in 2017/18 (0.6% of GDP), falling to around £7 billion by 2020/21 (0.3% of GDP). The CBI supports the more flexible approach taken by the Government not to achieve fiscal surplus by the end of this parliament – although the public finances should be balanced over the economic cycle.

Further detail of CBI proposals:

Keeping the UK’s tax and regulation system competitive

  • Exempt new plant and machinery investments from business rate calculations to spur greater investment
  • Bring forward the switch from Retail Price Index to Consumer Price Index uprating in business rates to 2017/18 to help address the rising burden on firms
  • Capital allowances in the UK are the least competitive in the G7 and could benefit greatly from a review and a roadmap for the rest of the Parliament
  • Freeze the remaining long-haul band of Air Passenger Duty
  • Review pensions regulation to address the issues the low interest rate environment creates for firms operating Defined-Benefit pension schemes.

Laying the foundations for a world-class innovation environment

Innovation is at the heart of economic development in the UK. It drives productivity, anchors international investment and helps to raise living standards and lay the foundations for our future. To support businesses adopt the latest innovative processes and make the UK an innovation world-leader, Government should:

  • Embrace a modern industrial strategy that combines sectors and places to capitalise on our areas of competitive advantage
  • Target 3% of GDP joint public and private expenditure on R&D by 2025 – starting with a doubling of Innovate UK funding (currently £0.6bn a year) and protecting core funding for Catapult Centres.

Provide clarity and stability on energy policy

The culmination of policy changes in the last year has led to investor confidence being damaged. It is crucial that the Government offers long-term stability on energy and climate change policy. The Government should:

  • Set out the timing for the next Contracts for Difference auction
  • Provide clarity on Levy Control Framework funding and maintain the post-2020 carbon Price Floor freeze
  • Reaffirm the fiscal programme set out for North Sea oil and gas operators.

Accessing and growing talent for the future

Building a more prosperous and inclusive economy that works for everyone means business and Government need to do more to develop and attract a wider range of people into careers, and to give them the skills and opportunities they need to earn more, reach their potential and help businesses thrive.

  • Close the gap on maternity pay and childcare support (part-funded through vouchers) by extending Statutory Mandatory Pay to 52 weeks and provide 15 hours of free universal childcare to all children from the age of 1 to 4
  • Expand the controlling immigration fund to improve public confidence. The recent creation of a new £140 million fund is welcome, but greater impact could be achieved by a larger fund that directs additional resources to the public services in affected local communities. This could be achieved without additional cost by redirecting revenue already raised from businesses through the Immigration Health Surcharge and the forthcoming Immigration Skills Charge.