How can the government boost UK business investment?

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Over the last few days a number of guests contributed to our investment blog series setting out why government should be focusing on boosting business investment and providing a range of ideas on how this can best be achieved.

With contributions from a wide range of people and organisations, there were a number of points of consensus and a range of ideas to boost investment that the government can consider. These ideas are briefly summarised below.

There is a clear case for the government to focus on boosting investment…

The importance of investment was widely supported and backed by evidence. The UK has very low investment levels and this is not just a short-term problem. For decades UK investment has been low compared to European competitors and the US and since the end of the recession business investment has failed to recover to the extent expected. Low investment levels are impacting the UKs relative productivity and competitiveness.

There has been some positive news though. Manufacturing investment intentions have been strong during the recovery, with a consistently positive balance of manufacturers planning to increase investment since the end of the recession.

… capital allowances would provide a strong incentive in the short term …

Virtually all contributors recommended raising capital allowances to drive higher investment in the next two years. 100% capital allowances for two years would drive a spike in investment that the UK needs.

Capital allowances do make a real difference to business investment. In his blog, Stuart Fell discusses how low capital allowances impacts cash flow and ultimately investment.

… and changes in a number of other areas will also help reduce the barriers firms face when investing

  • Other areas that were identified as important for investment include
  • Improving access to finance, both through the banking sector but also alternatives
  • Further improvements to the tax system, including the R&D tax regime and the headline rate of corporation tax
  • Greater urgency in infrastructure investment
  • Providing a long-term signal to business to provide greater policy certainty

The Autumn statement, which the Chancellor will present next Wednesday, provides an opportunity for the government to act now to boost investment in the UK. We wait with bated breath to see what Wednesday has in store for business.

EEF thanks Tom Lawton (BDO), Paul Everitt (SMMT), Paul O'Donnell (MTA), Steve Bates (BIA), Chris White MP and Stuart Fell Chairman of Metal Assemblies Ltd for your contributors to this investment blog series.

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