As businesses continue to focus on recovery from the pandemic and speculation on the contents of next week’s Autumn Budget continues, Grant Thornton UK LLP’s latest Business Outlook Tracker* found that one in three (31%) mid-market businesses believe the increased tax burden is a top threat to the growth of their business.
The bi-monthly Tracker, which surveyed 605 mid-market businesses in October 2021, showed that the increased tax burden was considered as big a threat to the market as digital security and cyber risk.
Businesses have already been hit this year with the upcoming rise in corporation tax to 25%, announced in the March Budget, and the recent announcement of a rise in National Insurance from April 2022 to help fund the health and social care sectors.
With changing tax policy placing an ever greater strain on business finances, the survey found that the policies the mid-market would most like to see introduced by government to support business growth are:
- measures to improve infrastructure (32%)
- incentives for employers to invest in skills attraction and development (31%)
- incentives to support low carbon business strategies (30%)
- measures to level up the UK economy with more devolved powers (30%)
- simplification of UK business tax systems (30%)
These priorities remain largely unchanged from those cited in Grant Thornton’s earlier edition of the Tracker conducted before the Spring Budget. However, with COP26 just around the corner, incentives for low carbon business strategies has risen up the agenda.
Changing tax policy, coupled with current supply chain issues, may also be impacting optimism levels in the mid-market. The survey finds that optimism levels have dropped across the board compared to the last Tracker in August, with a reduction in business’ revenue (-12pp) and profit (-18pp) expectations, and a reduction in optimism on the outlook of the UK economy (-9pp).
Dave Munton, Head of UK Markets and Clients, Grant Thornton UK LLP commented:
“The upcoming Autumn Budget requires a careful balancing act from the Chancellor. Business confidence is increasingly fragile and is a critical element to recovery but the market continues to face challenges. Businesses are currently batting a perfect storm of issues from supply chain disruption, rising tax burden, lack of talent, increasing energy prices and rising uncertainty as we move towards winter.
“To gain the confidence of UK businesses, the government will need to show that they are able to deliver both short term support and also long-term, flexible solutions that offer a clear path to, not just recovery, but also growth. As our research shows, businesses have long favoured a simplified UK tax system but, as the tax burden grows, we are yet to see any progress in this area.
“With COP26 on the horizon and the publication of the government’s Net Zero Strategy this week, it’s encouraging to see that policies around low carbon business strategies have risen in priority for the mid-market. We know from previous research that only 51% of mid-sized businesses have a net zero carbon strategy in place. To shift the dial in this area and to engage the market effectively in taking action, policy setters need to share clearer guidance that helps businesses to integrate net zero strategies into their operations, ensures the mid-market has access to funds and projects, and consolidates relevant reporting frameworks and standards.
“Measures to improve infrastructure and to ‘level up’ the economy also remain top priorities and, if investment is made, are likely to be significant drivers of growth across the country. If businesses have confidence that the infrastructure around them is going to be improved, they are more likely to be encouraged to invest and plan for the future.”
*The Grant Thornton Business Outlook Tracker is a bi-monthly survey of UK mid-sized businesses. Censuswide (on behalf of Grant Thornton UK LLP) surveyed 605 senior decision makers in UK mid-market businesses from 29 September 2021 - 12 October 2021. A mid-sized business is defined as £50 million - £500 million annual turnover.