Ahead of next month's Budget announcement, leading business and financial adviser Grant Thornton UK LLP sets out its key policy recommendations to enable the UK's dynamic mid-sized business* (MSB) population to continue powering the British economy.
The firm's most recent Business Confidence Monitor with the ICAEW for January shows that despite strong economic growth during 2014, UK business confidence fell for the third consecutive quarter. Grant Thornton's Agents of Growth analysis suggests that further measures to promote growth and productivity in MSBs could add an additional £50 billion to the UK economy by 2020.
As such, Grant Thornton strongly believes that the UK's 'forgotten middle' MSB population holds the key to unlocking significant growth across the UK economy and has written to the Chancellor of the Exchequer to prioritise the following five areas for business growth:
The latest ONS figures show that the UK's trade deficit widened last year to £34.8bn – the widest trade gap since 2010, largely driven by a steep fall in UK exports. In its Autumn Statement submission, Grant Thornton set out proposals for a tax relief for the initial costs of researching and entering a new export market. The firm would welcome the launch of a Treasury consultation on this idea, which now has widespread support from a significant number of business organisations including CBI, Forum of Private Business, Institute of Directors, British Chamber of Commerce and ICAEW.
Skills and training
UK businesses reported increasing skills shortages in the most recent Grant Thornton/ICAEW Business Confidence Monitor. Grant Thornton welcomed the Chancellor's announcement in the Autumn Statement of an exemption from employer's National Insurance Contributions for apprentices under 24 years old; but would now encourage the Treasury to extend this further, to apprentices of all ages, in order to further stimulate employer investment in training. The firm also supports the government's continued commitment to give employers direct control of apprenticeship funding and would welcome further progress in implementing this at Budget.
Regulatory and administrative burdens
Grant Thornton's Agents of Growth research found that regulatory burdens are now seen as the biggest barrier to growth by mid-sized businesses and 43.5% of MSBs reported that meeting regulatory requirements would be more of a challenge this year than 2014. The firm believes that the Office of Tax Simplification (OTS), which the Treasury set up in 2010, has played an important role and it strongly supports the recommendations of its review on the competitiveness of UK tax administration. Grant Thornton urges the Chancellor to commit to rapid implementation of all the OTS recommendations, including on raising the thresholds for transfer pricing and for quarterly instalment payments. It would also encourage government departments to stop treating all businesses with turnover above £25million as 'large businesses' for the purpose of new regulatory requirements, such as the new reporting requirements currently being introduced by the Department for Business Innovation and Skills.
Northern Powerhouse and city region devolution
The Business Confidence Monitor showed that, unlike the rest of the UK, business confidence held steady at the start of this year in Northern England and Yorkshire and Humber, perhaps buoyed by stronger export performance than the rest of the UK. These encouraging signs are a further demonstration of the importance of devolution to city regions and investment in the infrastructure of the Northern Powerhouse. Grant Thornton would welcome further commitments to empowering city regions, particularly on transport and skills and further consideration of business rates; to invest in coast-to-coast transport connectivity in the North; and to look at ways of expanding international flights from regional airports such as Manchester.
Access to long term growth finance
In the latest Grant Thornton International Business Report survey, only 8% of UK businesses pointed to access to short-term finance as a potential constraint; the lowest amongst global economies surveyed. The firm therefore believes that the government is right to focus on longer term growth capital, rather than short-term finance, and welcomes proposals for a new 'Help to Grow' initiative by the British Business Bank. Grant Thornton would also recommend a consultation on promoting corporate venturing, as also supported by Policy Exchange, RSA, BVCA, Social Market Foundation, COADEC and Centre for Entrepreneurs.
Jonathan Riley, UK Head of Tax at Grant Thornton UK LLP, commented: "Ahead of one of the most hotly contested and unpredictable General Elections in modern memory, the Chancellor has a unique opportunity to set in motion policies which will enable the UK's crucial business constituencies to grow the economy in the years ahead – irrespective of who wins the election. Policies aimed particularly at the UK MSB population – such as the recently announced 'Help to Grow' scheme to develop a 'UK Mittelstand' – are indeed commendable; yet more can and should be done to further engender a UK business environment fit for purpose in the long term. This includes not only enabling superstar high-growth companies to shine, but also recognising the crucial role played by its oft-forgotten mid-sized businesses which have kept the economy ticking in the downturn and are now re-establishing Britain as an international business hub."