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Britain needs a ‘boost to growth’ as ​​tax hikes threaten investment


The Confederation of British Industry said in its latest forecast that a “short-term recovery” in capital spending would end in 2023 due to a tax hike on companies.

Investment in the UK has lagged behind other advanced economies for decades and the business lobby group’s forecasts will deal a blow to the UK. Prime Minister Boris Johnson’s Aspiration to build a high-wage and high-productivity economy.

Business investment will grow faster than pre-pandemic levels by the end of next year, the CBI said, before slumping as companies hit by the corporate tax hike and ending with tax breaks on some payments. invest in plant and machinery, CBI said.

The corporate tax rate will increase from 19% to 25% in April 2023. UK Finance Minister Rishi Sunak announced the tax hike in March this year to help pay the costs of the pandemic and reduce borrowing. government debt. The plant and machinery tax relief, introduced earlier this year, will also expire in April 2023.

Investment stalled after the Brexit referendum in 2016 as companies were plagued by uncertainty about Britain’s future trading relationship with the European Union. It has fallen further since the start of the Covid-19 pandemic.

The CBI said UK firms’ capital spending fell 11.6% between the third quarter of 2019 and 2020.

As the government admits, business investment is already low by the standards of other advanced economies. A UK Finance Department bulletin released in April said: “Much of the UK’s productivity disparity with its competitors is due to our historically low levels of business investment. me compared to my peers. Weak business investment has played a key role in slowing productivity growth since 2008.

Investing in technology, skilled workers and innovation is key to boosting productivity, driving growth and earnings without driving prices higher. CBI’s warning comes amid continued inflation. It hit a The 10-year high was 4.2% in October, and the Bank of England chief economist has warned that it could exceed 5% by early 2022.

“I know when I talk to companies of all sizes that they have an ambitious investment mindset and are anxious to execute on growth plans. But while the intentions have thawed, we are getting there. a cliff edge by 2023,” CBI Director General Tony Danker said in a statement.

He said the tax cuts have been successful but the industry needs targeted measures to encourage “the scale of investment that we need, especially in green technologies. There needs to be an incentive to push. growth to protect and build our recovery.”

UK recovery still lags other G7 economies as growth slows

The UK economy will grow 6.5% in 2021, according to a forecast by the UK government’s Office of Budget Responsibility. But the economy won’t recover to its pre-pandemic size until the first quarter of next year, the Bank of England forecasts.

The recovery has been hampered by Brexit, which the OBR believes will cause more lasting damage to the economy than the pandemic.

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