The next Government must reinvigorate the regions, ensuring every part of the country is open for business, the IoD has argued, as it published the first of a set of business manifestos papers today.
Setting out business leaders’ domestic priorities for the new administration, the directors’ body called on the incoming Government to target business reliefs and tax incentives at areas in need of investment, build long-term regional funding pots like ‘urban wealth funds’, and conduct ‘regional Cabinet meetings’, alongside pursuing wider decentralisation and rapid improvements to local transport and fast broadband access.
Urging parties not to use Brexit as a ‘get-out clause’ from tackling the challenges facing enterprises at home, the IoD also urged the new administration to take steps to fix the UK’s dire record on productivity, recommending a blitz of investment incentives to shore up confidence, push firms’ spending plans over the line, and help kick-start productivity growth, including a new ‘Productivity Allowance’ tax incentive for SMEs, and boosted reliefs for start-up and scale-up investment.
Key recommendations to upgrade the UK’s business environment from the manifesto include:
- Drive up productivity by kick-starting business investment. Political uncertainty has bottled up investment, compounding a decade of anaemic productivity growth, which has in turn put a lid on wage increases. To push firms’ investments over the line, the IoD has called for a new ‘Productivity Allowance’ tax incentive for SMEs; an improvement to start-up and scale-up investment reliefs, including the EIS and SEIS; and an extension to the higher £1m Annual Investment Allowance cap.
- Tailor the tax and regulatory system to enable SMEs to thrive. At a tumultuous time, margins are tight for many small firms, and burdensome levies and red tape add to the challenge. The IoD recommends the introduction of business rates holidays for firms investing in their organisations, alongside a simplification of the tax system, and a pause to the introduction of major new regulations such as IR35.
- Turbocharge regional growth and connectivity. The UK’s regional imbalances are holding back its overall potential. Our road, rail and digital infrastructure need a revamp. Meanwhile, the new Government should pilot regional zones with variances in business incentives to stimulate growth in areas in need of investment. It should also develop long-term funding pots like 'urban wealth funds', conduct 'regional Cabinet meetings', create a regional taskforce to monitor vulnerable areas, and pursue wider decentralisation.
- Create a world-class flexible skills system. Skills gaps are holding back firms across the UK, while the shifting world of work requires a revamped skills system. The IoD has urged parties to incentivise lifelong learning through tax breaks while widening the scope of the Apprenticeship Levy to reflect the needs of businesses. The UK should also leverage its network of world-class universities to drive-up R&D growth across the country.
Further details on the IoD’s proposals can be found in the manifesto here.
Tej Parikh, Chief Economist at the Institute of Directors, said:
“While Brexit may continue to dominate politics in 2020, this can’t just be a Brexit election. Leaving the EU isn’t a get-out clause allowing the incoming Government to overlook the many domestic hurdles impeding the UK’s economic growth.
“From backing start-ups and scale-ups, to speeding up full-fibre broadband delivery and strengthening the links between universities and SMEs, there’s no shortage of steps government can and should take to put our economy on the front foot and reinvigorate the regions. After years of bottled-up investment, we have to make up for lost time to sort out the country’s dire record on productivity.
“Parties have signalled their intention to spend big in the years ahead, but there’s no point filling the tank with fuel if the engine still needs a service. Politicians must show they understand the day-to-day challenges facing businesses and be strategic, realistic, but ambitious in their response.”