Manufacturers call for MOT of UK's business tax & regulation system

10 October, 2023

The call was made on the back of a major survey published by Make UK and RSM which sets out a daunting challenge to reform the UK regime of business taxation and regulation, with almost half of companies believing the current system is unfavourable and, more than a quarter feel is worse than China and other major competitors.

Furthermore, companies are also reporting that the ‘flip flopping’ and frequent changes to policies on investment and R&D incentives in recent years have hampered business’ investment plans. As a result, Make UK is urging the Chancellor to announce that there will be just a single annual fiscal statement from now on.

Reforms would look at measures, such as Business Rates, the research and development (R&D) tax credits, the Apprentice Levy and the Capital Allowances and Full Expensing system, and whether they are fit for an economy undergoing huge transformational change and encouraging, or hampering, long-term investment in capital, innovation, skills and moves to net zero.

The findings in the report also support the view that an industrial strategy which encompasses reform of the current business tax and regulation system would lead to greater investment in labour and skills, R&D and decarbonisation.

Fhaheen Khan, Senior Economist at Make UK, said: “Manufacturers are clear that many aspects of the current tax and regulatory system are not fit for purpose and are failing to promote the vital investment in skills, capital and green growth. This is not helped by the fact we have two fiscal statements a year which hampers business investment planning. We cannot continue with the current flip flopping and policy inconsistency if we are to shake the economy out of its current anaemic state and promote long-term growth. Government must start by conducting an urgent MOT of the current unfavourable regime to make it work for, rather than against, business.”

Mike Thornton, head of manufacturing at RSM, said: “The correlation between tax and regulation and economic growth is clear. Yet UK manufacturers find the current framework a burden and unfavourable - putting UK industry at a competitive disadvantage globally. Long term commitment to generous and accessible incentives, and simplified regulations, are key to boosting future investment, productivity and skills.”

According to the report, almost half of companies (44%) believe the UK has an unfavourable business tax and regulatory environment, with less than a fifth (18%) believing it to be favourable. On balance, manufacturers say the UK is worse than its competitors with more than a quarter (28%) believing it to be less favourable than China. Over a quarter (27%) believe it is worse than the US, Germany (26%), France (23%) and Italy (21%).