Ahead of the Autumn Statement, Make UK and CBI – backed by more than 200 companies and trade associations, including the CEA – have written to the Chancellor to ask that full capital expensing be made a permanent feature of the UK tax system.
Suneeta Johal, CEO of the CEA, also spoke about other items on the CEA’s wish list. “ It’s crucial that the government collaborates with the construction industry to extract valuable lessons from the incomplete HS2 project, ensuring that future infrastructure developments do not encounter similar setbacks. We are also urging a review of the current range of incentives and allowances to maintain the UK’s international competitive edge. Additionally, considering the ongoing instability and recent rise in fuel prices, we believe retaining the 2022 cut in fuel duty is essential. Lastly, the proposed alterations to the R&D tax relief schemes could have a significant impact on OEMs. A simplified, unified scheme could greatly encourage innovation and development within the construction equipment sector, by offering tax reductions or cash incentives for qualifying R&D projects.”
We are writing to ask you to make full expensing a permanent feature of the UK tax system in the Autumn Statement (Wednesday 22nd November). At this time, we believe that this would have the single most transformational impact on business investment and growth and accelerate industry’s transition towards net zero.
It is a challenging time for the UK economy, with recent data showing that productivity has stagnated since 2008. If we are to tackle the pressures businesses face, we must create an environment that unlocks business investment to achieve sustainable growth and mobilise the potential and productivity of the UK workforce.
We welcome your decision in the Spring to introduce a three-year temporary full expensing regime for all plant and machinery. But OBR forecasts show that the temporary nature of the policy means most additional investment during this period will be brought forward, rather than being entirely new. This will limit the extent of productivity gains. Moreover, in many sectors, including manufacturing, investment cycles are far longer than three years, often spanning from five to seven to even thirty years, depending on the nature of that investment and the sector.
CBI and Make UK analysis, supported by other leading trade associations and business leaders, shows the significant impact introducing full expensing could have on UK business investment. Whilst there is an upfront cost, the long-term benefit to the public finances will be positive as providing allowances upfront enables greater investment, boosting employment and wider tax revenues. A recent report from the IFS supported this view. Finally, higher business investment, which would lead to a greater demand for capital in the economy, would also increase the long-run potential growth of the UK economy.
For the reasons above, therefore, we urge you to make this policy permanent to unlock much-needed investment and drive productivity.
Stephen Phipson CBE
Chief Executive, Make UK
Chief Executive, CBI
Trade Association Signatories
Construction Equipment Association (Suneeta Johal, CEO, Construction Equipment Association)