In the Spring Budget, the government listened to our calls that the UK’s tax regime was about to get far less competitive. But its solution was temporary.
The government replaced the two-year super-deduction – a successful initiative that aided recovery and supported investment post-pandemic – with a three-year full expensing regime for plant and machinery. It has provided further encouragement to businesses to invest, particularly small and medium-sized firms with shorter investment timelines.
But many firms have longer timelines for investment – a temporary solution doesn’t provide the certainty they need.
Particularly if they’re choosing between the UK and other competitive markets on where they’re building manufacturing plants, for example.
The OBR forecast highlights the problem: most of the additional investments being made in the next three years isn’t new – it has been brought forward from future years to benefit from the temporary policy.
By contrast, our analysis suggests permanent full expensing could unlock £52.8bn of extra investment per year by 2030/31 and boost the level of GDP by 2% in the same period. That in itself is worth an additional £53.1bn.
Over a third of businesses we surveyed said they would increase their investments if the scheme were extended to leased and rented assets too.
Make full expensing permanent and expand its scope to leased and rented assets, and we’ll be giving a strong international signal for firms that the UK is a rewarding place for investment. And there’s every chance we’ll be incentivising plenty of green investments too.