British manufacturers are urging the Chancellor to conduct a comprehensive review of the UK’s business tax and regulatory landscape in the upcoming Autumn Statement. This call to action is based on a survey conducted by Make UK and RSM, which highlights the need for reform in the current system. Nearly half of the surveyed companies consider the existing business taxation and regulatory framework to be unfavorable, with over a quarter believing it to be less favorable than that of major global competitors, including China.
The survey also underscores how frequent changes in policies related to investment and research and development (R&D) incentives in recent years have disrupted business investment planning. In response, Make UK is recommending that the Chancellor introduces a single annual fiscal statement to provide stability.
The proposed reforms would assess various measures, including Business Rates, R&D tax credits, the Apprentice Levy, and the Capital Allowances and Full Expensing system. The objective is to determine whether these measures are suitable for an economy undergoing significant transformation and whether they encourage or hinder long-term investment in areas such as capital, innovation, skills, and achieving net-zero emissions.
The report also indicates that an industrial strategy that incorporates reform of the business tax and regulation system would lead to greater investment in labor and skills, R&D, and decarbonization.
Fhaheen Khan, Senior Economist at Make UK, emphasized that the current tax and regulatory system is inadequate and is failing to promote essential investment in critical areas like skills, capital, and sustainable growth. This issue is exacerbated by the biannual fiscal statements, which disrupt business investment planning. Khan insists that a comprehensive review is essential to align the system with business needs.
Mike Thornton, head of manufacturing at RSM, stressed the strong link between tax, regulation, and economic growth. UK manufacturers perceive the current regulatory framework as burdensome and unfavorable, resulting in a competitive disadvantage on the global stage. Thornton argues that long-term commitments to simplified regulations and accessible incentives are vital for enhancing future investments, productivity, and skills.
The survey’s findings reveal that almost half of the participating companies view the UK’s business tax and regulatory environment as unfavorable, with only 18% considering it favorable. Many manufacturers believe that the UK’s environment is less favorable than its global counterparts, including China, the US, Germany, France, and Italy.
On the contrary, manufacturers assert that a simplified regulatory and incentive framework would ease the business burden. The majority believe that the frequent changes in R&D and investment incentives over the past three years have made it challenging to plan investments. Capital allowances for plant and machinery, R&D tax credits, and a competitive Corporation Tax system were identified as the most effective policy tools to promote investment and growth.
The survey also demonstrates that manufacturers perceive substantial benefits in an industrial strategy. It is seen as a catalyst for greater investment in labor and skills, R&D, and decarbonization efforts.
This survey encompassed 150 companies and was conducted between July 26 and August 19, providing a comprehensive overview of the challenges and opportunities within the UK’s manufacturing sector.