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Business leaders to government: ‘act decisively’ to stabilise economic confidence

15 Nov 2016
HM treasury on building

Institute of Directors calls for Chancellor to take investment-boosting steps at Autumn Statement, as new figures reveal drop in optimism

The Government must act at the Autumn Statement to stabilise faltering economic confidence, business leaders have said today. Positivity had been returning to companies over the summer, with members of the Institute of Directors reporting growing economic optimism between July and September, but firms’ expectations for the next 12 months fell back dramatically in October.

The IoD released the figures alongside its recommendations to Philip Hammond for his first Autumn Statement as Chancellor on the 23 November. While business leaders are nervous about the wider economy, they remain upbeat about their own fortunes, on average expecting both profits and employment to grow over the next year. The problem lies in investment where, on balance, IoD members expect to see a decline.

Simon Walker, Director General of the IoD, said:

“Business leaders are becoming experts at living with political uncertainty. We can’t know yet the future shape of the UK’s relationship with the EU, or the direction in which Donald Trump will take America, but we do know that Britain’s economic fortunes are dependent on our companies continuing to hire and invest.

“The good news is that our members are more optimistic about their companies. Their natural response to more difficult trading conditions is to innovate and seek out new customers. This is a moment for the Government to act decisively to make it easier for firms to expand and find more opportunities. We know that there isn’t a limitless source of funds, so we urge the Chancellor to make tax changes that incentivise investment, alongside targeted infrastructure investment.”

The organisation, which represents 34,000 company directors, said its figures highlighted the importance of the Government targeting investment-boosting measures, particularly the Annual Investment Allowance (AIA). The current cap for businesses to offset purchases of machinery and tools against their profits is £200,000. The IoD is calling for this to be raised to £1million to encourage small and mid-sized business to buy productivity-raising equipment.

In its submission, the IoD also called for the Government to:

  • Expand the use of the Enterprise Investment and Seed Enterprise Investment Schemes to direct more money to growing businesses
  • Extend business rate relief to cover more small companies
  • Create a ‘white list’ for authentic tax-planning. Firms do not want to fall foul of the law, but currently do not have enough guidance on where the Government draws line between acceptable accounting and aggressive avoidance
  • Raise the level of ambition on UK broadband speeds, from the current target to give homes access to speeds 10megabits per second by 2020, to 10 gigabits per second by 2030
  • Improve connections to Stansted airport while a third runway is built at Heathrow
  • Consult on more radical tax reforms, including finding a replacement for corporation tax, which is becoming increasingly poorly-suited to taxing global businesses

Full survey results

How optimistic are you about both the wider UK economy and also your (primary) organisation over the next 12 months?

Survey conducted July 14-28th; 1,106 respondents

Wider UK economy

Your primary organisation

Very optimistic

5%

8%

Optimistic

30%

38%

Neither optimistic nor pessimistic

22%

33%

Pessimistic

33%

17%

Very pessimistic

10%

4%

Don’t know

0%

1%

Survey Conducted September 14 -29th; 925 respondents

Wider UK economy

Your primary organisation

Very optimistic

10%

15%

Quite optimistic

38%

41%

Neither optimistic nor pessimistic

18%

26%

Quite pessimistic

28%

16%

Very pessimistic

5%

2%

Don’t know

1%

1%

Survey Conducted October 12-27th; 1,071 respondents

Wider UK economy

Your primary organisation

Very optimistic

5%

10%

Quite optimistic

25%

36%

Neither optimistic nor pessimistic

21%

32%

Quite pessimistic

38%

18%

Very pessimistic

12%

3%

Don’t know

0%

0%

Comparing the next 12 months with the last 12 months, what do you believe the outlook for your (primary) organisation to be in terms of...

 

Revenue

Profitability

Investment

Employment

Much higher

6%

5%

4%

2%

Somewhat higher

44%

36%

18%

25%

No change

24%

27%

50%

50%

Somewhat lower

21%

24%

18%

17%

Much lower

4%

6%

8%

5%

Don’t know

1%

1%

2%

2%

Net

+28

+11

-4

+5

If revenues were to come under pressure in the coming 12 months, what would your first actions be to address this challenge?

Reduce planned routine investment

30%

Reduce planned new project investment

40%

Arrange to borrow revenue shortfall from banks

5%

Reduce headcount

36%

Seek out new customers

67%

Reduce compensation levels

18%

Reduce regular running costs

54%

Run down accumulated reserves

33%

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