UK middle market wants more Government investment
Mid-sized businesses in the UK want to see announcements which will increase government investment and also put more money in people’s pockets when the Chancellor delivers his budget on Wednesday, according to a new poll.
KPMG surveyed board level executives at 161 medium sized businesses on their thoughts ahead of the Budget this week.
The respondents were asked which single measure would help them with their own organisations’ growth plans. “Putting more money in employee’s pockets” was the most popular response with more than one in five of respondents. Looking at tax measures specifically, reducing the National Insurance Contribution (NIC) rate was the most popular measure that businesses wanted to hear announced this week, followed by an increase in the threshold for the 40% personal tax rate. These measures were closely followed by a desire to see increased tax relief for investment in machinery, premises and technology.
Commenting on the findings, David Bywater, tax partner for KPMG’s Middle Market Practice said: “Although businesses are regaining their confidence as the economy grows, our research shows that they would like further encouragement to invest in plant and machinery to support future growth. Business is also acutely aware that if people feel that they have more money in their pockets, this will help to keep economic growth on track.
For many businesses outside London, there is also a need for an increase in investment of the physical infrastructure which allows the UK’s middle market to get on and do business. Long-term under investment of public and private money in hard infrastructure, such as roads and railways, is now proving to be a barrier to growth that needs to be addressed if our regional business communities are to fully play their part in economic growth.
“Like the Chancellor, employers in mid sized enterprises currently have very little room for manoeuvre and can’t afford to award large pay rises. For many there is a feeling that there is little benefit in awarding pay rises if 40% of it is eaten up in tax. Additionally a shift in the threshold of the lower 20% personal income tax bracket could help employees, putting more of their wages into their pockets which in turn could boost the economy.”
However, with the election now around 12 months away, a third of businesses felt that the government has very little room for giveaways in the Budget if they want to keep the economy growing.
The areas that businesses do not want to see mentioned in the Budget this week were any increase in the VAT rate, a return of the 50% tax rate or any increase in the rate of corporation tax.
David Bywater concluded: “The UK currently has a tax regime that is highly attractive and very competitive on a global level so it is unlikely that the Chancellor will make any announcements around the rate of corporation tax, or VAT, which could be damaging to the economy as a whole and have a knock on effect to our mid-market businesses.”
161 executives were polled between 10th-14th March 2014.
Table of Results:
Which single investment/incentive measure would you like to see announced in the Chancellor’s Budget which will make a difference to your business?
Increased investment in hard infrastructure (road and rail etc)- 31%
Announcement for an accelerated house building programme in the UK – 17%
Further investment and increased training grants to help improve skills in the UK – 17%
More incentives to Help to Buy/ Funding for Lending schemes – 3%
Measures to cap / cool the housing market – 12%
Measures to help reduce energy prices – 11%
Measure to help working families and the increasing cost of childcare – 9%
Which single tax measure would you like to see announced in the Chancellor’s Budget which will make a difference to your business?
Business Rate Reduction – 18%
Reduction in the rate of small company corporation tax rate – 10%
Zero rating of supplies for companies that export – 5%
Increase the threshold of the basic tax rate – 10%
Increase the threshold for the 40% tax rate – 21%
Reduction in the National Insurance Contribution rate – 29%
Reduction in fuel duty – 7%
Which single measure would you like to see announced in the Budget which would help with your organisation’s growth plans?
Business rates abolished for small businesses – 4%
Action on reducing red tape for businesses – 17%
More help for businesses looking to overseas markets – 21%
Measures to help put more money in employee’s pockets – 22%
Investment / Training grants to help get more young people in to work = 6%
Introduction of tax relief for infrastructure costs – 11%
More tax relief for businesses investing in machinery / premises / technology – 19%
Which or the following is the single announcement that you do not want to see in the Budget?
Return of the 50% tax rate – 23%
Increase in business rates – 6%
Removal of the annual investment allowance – 4%
Increase in fuel duty – 2%
Increase in any of the Corporate Tax Rates – 16%
Increase in VAT – 25%
Removal of Entrepreneur’s Relief – 4%
Reduction in the Pension Cap – 5%
Increase un Employers National Insurance Contribution rate – 15%
Please choose one of the following to best describe your feelings on the forthcoming Budget:
The Government has very little room for giveaways if they want to keep the economy growing – 29%
If we are to continue at the current growth rate, it is imperative that the Chancellor focuses on increasing investment – 37%
The Chancellor has, and is focussing on the right issues which will restore long term stability to the economy – 13%
We need to be focussing on everything possible to promote international trade to and from the UK – 14%
The Budget will have little or no impact on me or my business – 7%
