Budget Business Reforms Urged To Unlock £60 Billion GDP Boost

Rathbones is urging the government to support  entrepreneurs  and  smaller companies with a Budget encouraging them to  invest.  

Rathbones is calling for more generous capital allowances  and a reformed business rates system to encourage entrepreneurship and investment. The firm calculates that extending 100% capital allowances to all business investment could add between £15bn and £60bn to UK GDP, representing a long-term boost of 0.6% to 2% of GDP. 

In  its Building prosperity:  Five ways to drive growth and investment in the UK report, Rathbones urges the Chancellor to build on the commitment to maintain  existing reliefs and to make incentives for all business investment - including buildings, software, and research & development - more generous. Reforming business rates, particularly by moving towards taxing only the value of commercial land, would remove the penalty for upgrading premises and further stimulate growth. 

Oliver Jones, Head of Asset Allocation at Rathbones and author of the report, says: “As a firm representing business owners and entrepreneurs, we know how policy reform can shape business success. To make the UK the best place to start and grow a business, extending capital allowances and reforming business taxation are essential." 

“More generous incentives for investment - covering buildings, software, and R&D - would encourage firms to invest and help the UK compete with international rivals, like the US which introduced similar measures earlier this year."

“While these reforms may reduce tax revenue initially, they would drive growth and strengthen the UK’s global competitiveness.” 

More than 1,000 founders, owners, and senior executives of small and medium-sized businesses  told Rathbones in a new poll that their confidence has dropped in the past  year, with 37% of founders and entrepreneurs saying they are less confident than a year ago. 

Confidence has declined most among leaders of firms in hospitality/leisure and healthcare/life sciences (35% respectively). 

Despite these sentiments, 32% of SMEs plan to invest in new products, services, or markets in the next 12 months, while 28% remain  unsure. The support most needed to scale and grow includes: 

• Government tax breaks (51%) 

• Financial support (39%) 

• Digital transformation (30%) 

Bracing For A ‘Bad’ Budget 

Nearly half (46%) of SMEs believe this year’s Budget will be bad for business, with 70% fearing tax rises and 62% feeling the government does not understand their needs. 

In response to potential unfavourable changes, SMEs are preparing to reduce costs (37%), freeze hiring (28%), delay investment (26%), and cut jobs (20%). 

Ade Babatunde, Senior Financial Planning Director at Rathbones, says: "These findings reflect what we hear from clients and highlight a real sense of uncertainty ahead of the Budget."

"Business-friendly policies are essential to restore confidence and drive growth, ensuring the UK remains a dynamic place to start and grow a business.”