This Spring, we must go for growth

On 23 March, the Chancellor of the Exchequer will set out this year’s Spring Statement.

Ahead of this, the CBI launches its fiscal submission, setting out how the UK can begin to turn the tide on years of underinvestment, low productivity and instead, go for growth.

Why does the UK need to go for growth?

The latest Office for Budget Responsibility forecast showed the UK is up against challenge. UK GDP growth is set to fall to 1.3% in 2024 and the recent Bank of England forecast is more pessimistic still, expecting growth of only 1.0% in 2024. This is coupled with projections that capital spending will fall from mid-2023 onwards, as the super-deduction expires and the corporation tax rate increases – making UK business investment as a share of GDP the lowest in the G7. Firms also continue to face rising inflation, cost pressures, the risk of further COVID-19 variants and continued global supply chain disruption.

It's in this context that firms are looking at their investment plans, with typical investment cycles of six to 18 months. Business understands that efforts must be made to bring down our national debt. But with the tax burden set to be the highest in 70 years, there needs to be a counterweight to get business investment on the move again.

What is the CBI calling for?

This Spring, the CBI is calling on the government to signal to domestic and global investors that the UK is serious about growth and has the ambitions and innovation to achieve it. Higher productivity growth is the only sustainable way to pay down our debt, meet rising spending pressures, and keep commitments to cut taxes this parliament.

To seize the prize, the Government must make driving investment a cornerstone of tax, regulation, and industrial policy. This should start with action to:

1. Drive lasting productivity growth with a permanent Investment Deduction: Introduce a permanent Investment Deduction, providing a 100% tax deduction for capital spending from April 2023 to unlock 17% more capital investment a year by 2026. To further accelerate the transition to net zero, introduce a targeted ‘green’ super-deduction.
   
   
2. Challenge UK firms to invest in UK skills: Turn the Apprenticeship Levy into a Skills Challenge Fund to provide high-quality training to meet the needs of a changing economy, giving employers flexibility to spend on a variety of training and rewarding those who outperform on skills investment. Create an independent Council for Future Skills, to show how business action and the Government’s skills and immigration policies can fully tackle current and future skills and labour shortages.
   
   
3. Make sure Britain wins in global Green Markets: Build upon the Autumn Comprehensive Spending Review and close public investment gaps in crucial green growth areas such as buildings energy efficiency to properly retrofit homes and commercial buildings and to bring down energy bills. Set out a Contracts for Difference model for hydrogen by Autumn 2022 to enable investors to move quickly.
   
   
4. Seize Brexit opportunities to create world-leading dynamic and future-focused regulation: This Spring, announce the creation of an Office for Future Regulation (OFR), that brings together the Better Regulation Executive and the Regulatory Horizons Council, to be agile in adapting regulation to changing technologies, encourage innovation and coordinate regulation across Government departments.

And this is just the beginning…

Throughout the CBI’s submission we detail what further action can be taken this Spring to address immediate challenges – offering short-term support to help cashflow, labour shortages and learning to live with COVID-19 and its variants. As well as additional policies to stimulate immediate to longer-term investment and productivity across tax, skills, decarbonisation and to enable firms to play their part in levelling-up.

Short-term support should include:

• Continue and expand business access to Government backed loans through the Recovery Loan Scheme (RLS), with an extension of RLS to the end of 2022 to support firms struggling with rising energy costs and strained cash flow.
  
  
• Build on the success of Skills Bootcamps by expanding their remit and ensuring they continue to support roles facing critical skills and labour shortages. This is especially important until reform of the Apprenticeship Levy unlocks business investment in more agile training. Initial focus should be on warehouse operatives, HGV drivers, welding, retrofitting and mechanical and electrical engineering.
• Provide sufficient funding to deliver future winter flu and COVID-19 vaccines at pace throughout 2022 and 2023, to help keep people safe, the economy open and alleviate pressures from labour shortages and scale-up funding for antiviral treatments as soon as they are authorised by the MHRA, to protect the most vulnerable and allow them to live more confidently with the virus.

And as the government acts, so shall the CBI.

Throughout the CBI’s submission, we detail additional policy that we will be looking to engage the government on across the next year in our efforts to go for sustainable growth. This includes developing a blueprint for successful economic clusters across the UK and backing the new Skills Challenge Fund with a nationwide campaign for firms to adopt it.

And supporting regional growth. Levelling up is also a goal CBI members share with the government, which is why for towns in every part of the country we ask that the government continues to tackle the crippling business rates burden, removing downwards transition, freezing the UBR in 2023-24 followed by a permanent cap and providing a 5-year business rates discount on all rates payable for businesses who invest in their properties.

Read our full submission.