Calls for pro-business Budget to strengthen UK Brexit position

07 March 2017

  • 43% of businesses say investment in infrastructure would put the UK in its strongest position for Brexit
  • Outdated tax system is major obstacle to growth but reform could pay for infrastructure spending
  • Firms say commitment to simplicity would send a clear pro-business message

Businesses are calling on the Chancellor to speed up investment plans in infrastructure to help boost productivity and support UK growth plans in his speech tomorrow.

Firms also say an outdated and out of control tax system is a major obstacle to growth, as business leaders struggle to navigate the complexity of UK tax legislation.

According to a poll by accountancy and business advisory firm BDO LLP, almost half (43%) of businesses believe investment in infrastructure would put the economy in its strongest position as the UK prepares for Brexit.

The appeal comes following Hammond’s promise last year that a £23bn infrastructure investment fund would be deployed during the next five years.

David Brookes, tax partner at BDO LLP, said: “Hammond spent a lot of time in the Autumn Statement talking about infrastructure and productivity, but there has been little since that reassures businesses that action is being taken.”

According to the Office for National Statistics, in the time it takes a British worker to make £1, a German worker makes £1.35, a US worker £1.30 and a French worker £1.27.

“Investment in smart, connected infrastructure is about getting from A to B, physically and digitally, in the most efficient way possible. For every £1 invested in infrastructure, there’s a £3 return for the economy,” said Brookes.

“This ‘spend to save’ philosophy should be an attractive option for a Chancellor known as ‘spreadsheet Phil’. It would go some way to address the UK’s productivity issue and help bridge the gap with other nations.”

Outdated and out of control

Failure of the tax system to keep up with the working patterns of the gig economy and online businesses models is an area of increasing frustration for businesses.

A third of businesses have said aligning the employment tax rules and reforming businesses rates would be the best way for the Chancellor to raise taxes to fund infrastructure investments.

Brookes said: “The gig economy is now a mainstream issue and must be addressed by the government.

“Aligning NIC and income tax for the employed, self-employed and those using personal service companies would create a level playing field for all. It would deliver a lasting benefit of simplicity for businesses, and could raise a reported £1bn for the Treasury if NIC rates for the self-employed were increased from 9% to 12%.”

39% of businesses surveyed said business rates should be reformed to balance out the advantages of online business models over traditional bricks and mortar.

Brookes adds: “In the longer term, I wouldn’t be surprised to see the Government introduce some form of low tax on the ‘digital real estate’ of large online retailers.”

Tax simplification

Almost a third of businesses (28%) would like to see Hammond impose a moratorium until 2020 or when Brexit negotiations are finalised (whichever comes first) on any tax changes that do not simplify the system, according to BDO’s survey.

Simplifying the rules of Making Tax Digital for businesses with a turnover less than £10m and doing a u-turn on the decision not to align national insurance and income tax would ‘make life easier’, say 35% and 27% of businesses respectively.

“The UK tax code is almost 20,000 pages long. Businesses have cited the sheer scale and complexity of compliance as a major obstacle to growth,” says Brookes.

“A commitment to simplicity would send a clear pro-business message, allowing the Government to focus on Brexit and giving businesses some certainty in uncertain times.”

ENDS

Note to editors:

Accountancy and business advisory firm BDO LLP provides integrated advice and solutions to help businesses navigate a changing world.

Our clients are Britain’s economic engine – ambitious, entrepreneurially-spirited and high growth businesses that fuel the economy. 

We share our clients’ ambitions and their entrepreneurial mind-set. We have the right combination of global reach, integrity and expertise to help them succeed. 

BDO LLP

BDO LLP operates in 18 offices across the UK, employing 3,500 people offering tax, audit and assurance, and a range of advisory services. BDO LLP has revenues of £405m and is the UK member firm of the BDO International network.

BDO International

The BDO International network provides business advisory services in 158 countries, with 68,000 people working out of 1,400 offices worldwide. It has revenues of $7.6bn. 

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