Industry calls for reform of archaic business rates in ten point plan for economic reform

Published:  10 March, 2020

The archaic system of business rates must be swept away and replaced with a modern tax system which acts as an incentive to invest rather than working against capital investment according to Britain’s manufacturers.

The call was made today by Stephen Phipson, chief executive of Make UK ahead of this week’s Budget as part of a ten point economic plan to boost investment, improve skills and prepare industry for the digital future.

The need to provide a shot in the arm to investment is critical given the need to boost productivity with the UK having had the lowest level of private investment in capital as a share of GDP in the G7 for over two decades.

Currently, any investment in plant and machinery is included in the calculation of business rates which, according to Make UK, clearly penalises investment in capital. Together with the poor system of capital allowances in the UK this factory tax acts as a significant drag on investment and disproportionately impacts on the Midlands and North in particular with their exposure to manufacturing. Reform of business rates should also be allied with an increase in both the level of capital allowances and R&D tax credit to spur investment.

Make UK is urging the Chancellor to take the opportunity this week to show his commitment to making a step change in investment the centre of the Government’s economic vision for levelling up growth across the UK.

Commenting, Stephen Phipson, chief executive of Make UK, said:

“Low levels of private sector investment and poor productivity have been the achilles heel of the UK economy for decades. One of the numerous reasons for this is the archaic system of business rates which acts as a massive disincentive to invest given the increasingly high cost of capital investment. This disproportionately impacts on companies in the Midlands and North where industry has a high exposure.

“December’s election has provided some much needed certainty and business is looking to respond to that in a positive and optimistic way. I know the Chancellor is keen to help businesses grow and hope he can set out an economic vision for the new administration by announcing a complete review of the tax treatment of investment, including complete reform of business rates. This will help turbo charge the economy at a time in the economy needs it and help deliver regional rebalancing and faster growth.”

In addition to reform of business rates, Make UK is also recommended specific policy measures in each of the following areas:

- An ambitious UK-EU relationship that works for UK manufacturing

- Fix the failing Apprenticeship Levy to boost the supply of domestic skills

- Maximise export opportunities globally through increased support for exporters

- Accelerate regional economic development by delivering economic devolution

- Reboot the better regulation target

- Ensure immigration policy gives manufacturers access to the skills they need

- Reform regulations to reflect modern working practices and improving workplace health

- A just transition to a net zero economy that maximises the opportunities for green growth

- Turbocharge the digital transformation of manufacturing

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