The call was made by Make UK on the back of a survey showing that a majority of manufacturers would back the move which would help provide long term policy certainty and stability. Making the measure permanent would also encourage investment by manufacturers who largely have an average investment cycle of five years or more and for which the original three year plan would not have impacted decisions.
The survey also shows that the frequent changes to, and short term nature of, incentives has deterred investment decisions, while better, more accessible longer-term incentives would make investing in the UK easier to justify.
Furthermore, ahead of the Global Investment Summit being held by the Prime Minister later this month, at a time when the fight for capital has gone up a gear Make UK believes making full expensing permanent would be a bold move by the Chancellor to boost domestic investment.
- More than half of companies say full expensing should be made permanent
- Three quarters of companies say incentives in other countries makes UK investment harder to justify
- Almost half of manufacturers have an investment cycle longer than five years
- Three quarters of companies say greater policy consistency would build a supportive business environment
- More than half of manufacturers say frequent changes to incentives have not encouraged investment.
Verity Davidge, Director of Policy at Make UK, said: “Business investment has long been the achilles heel of the UK economy. If we are to break this cycle, try and kick start growth and, improve our productivity then making a step change in investment is a critical factor. The Chancellor has provided business with much needed re-assurance and calm over the last twelve months. He now has an ideal opportunity to provide a major boost for companies by making full expensing permanent, the single biggest measure the Government could take to transform business investment.”
According to the survey, almost half of companies (44%) believe the UK has an unfavourable business tax and regulatory environment, with almost three quarters (74%) saying better incentives elsewhere are making investing in the UK harder to justify.
Furthermore, more than half (54%) believe that frequent changes to investment incentives over the last three years have made it more challenging to plan investments. By contrast, fewer than a fifth (16%) felt the changes had allowed their business to increase investment.
According to Make UK, while the super deduction scheme was very generous, and those businesses who were able to use it welcomed the policy, it was too short term and made available at the wrong time (i.e. during a pandemic) making long term planning impossible.
The survey shows that six in ten companies invest in plant & machinery every two to eight years year with the majority having a cycle longer than five years, highlighting how difficult it is to directly affect investment decision making with short term solutions. In response, more than half of companies (55%) say full expensing should be made permanent which, according to Make UK would help provide the stability and certainty necessary for investment decisions.
The survey of 150 companies was conducted between 29 September and 13 October.