THE PATH TO GROWTH IS CLEAR

THE SPRING BUDGET IS THE CHANCE TO GET THE UK OUT OF ANY RECESSION SOONER RATHER THAN LATER

• Announce a successor to the Super-Deduction to ensure the UK is ‘back in the game on global investment’   
• Measures to help ease labour and skills shortages must be a priority in the Spring Budget 
• CBI calls for support in helping parents back into work with free childcare hours for 1- and 2-year-olds. Independent review of UK childcare system long overdue
• Help firms get ready for next winter and regain lost ground on green growth again by supercharging UK competitiveness in green markets.   

2023 is set to be another challenging year for the UK economy with inflation remaining high, a tight labour market and continued pressures on energy prices. But the CBI believes there is a path to growth if we prioritise innovation and tackle the great challenges of the economy at the forthcoming Budget. That’s through measures to tackle business investment, solve labour and skills shortages and boost green growth. 

Launching the CBI’s Budget calls after the Government mini reshuffle and Whitehall changes, the Director-General, Tony Danker, said:

“The Chancellor has restored market stability and reassured business of Government’s commitment to areas like innovation, R&D and infrastructure. With a new Whitehall machinery in place, this Budget is the opportunity to get the UK out of any recession sooner rather than later and transform the UK into a high-growth, innovation-first economy.  

“We know the economy can – and must – break out of its low growth trap, but we will need action on business investment to achieve it. Firms are seeing the end to the Super-deduction with nothing to replace it but a big rise in Corporation Tax. This will have a huge impact on investment and leave the UK falling behind its global competitors. 

“The tight labour market and economic inactivity is another big concern for all businesses across all sectors. With more than one million vacancies and UK parents facing some of the highest childcare costs in the OECD, we need to see immediate action to urgently solve the labour challenge. Without it, businesses are left trying to grow, invest and become more productive with one hand tied behind their backs.  

“We need to create stronger tailwinds to overcome the headwinds and that needs to happen this year, not next.”  

The CBI has identified key areas where the Government needs to act in the Budget to drive investment in long-term growth, boost confidence and get the economy growing again.  

This suggested package of measures (see attachment for details of the full submission) aims to get businesses investing, to help solve labour and skills shortages, help firms get ready for next winter’s energy pressures and begin to respond to US and EU moves and boost green growth to ensure the country doesn’t fall further behind. 

1. Get businesses investing: Investment incentives are being pulled away just at the time we need them most. Business investment is expected to continue declining through much of 2023, both due to falling activity and the end of the Government’s flagship Super-deduction.  As Corporation Tax rises six points in April, introducing full expensing for capital investment will make a big difference to offset the impact. If this is not achievable straight away, we propose introducing a three-year roadmap to full expensing, starting with a 50% investment allowance from this April, for capital spending which will send a clear signal to both domestic and international investors.  
2. Solve labour and skills shortages: 75% of firms say they’ve been hit by labour shortages in the last 12 months. More individuals need to be helped into work, to increase their hours and up-skill – through deepening and expanding childcare support, widening the scope of health support as a non-taxable benefit in kind and helping individuals to re-skill throughout their careers and as they return to work by launching a two-year pilot turning the Apprenticeship Levy into a “Skills Challenge Fund”. 
3. Help get firms ready for next winter’s energy pressures: The recent Energy Bill Discount Scheme provides a welcome buffer to many businesses assessing the challenges of next winter. But providing support on bills is just the first step. We now need to break the high-cost cycle through energy efficiency. Government can help reduce bills and emissions for business by extending the Industrial Energy Transformation Fund (IETF) from 2025 to 2030, and by launching ‘Help to Green’ vouchers for small and micro businesses.  
4. Boost green growth in the face of international competition: Enable the UK to enhance energy security and regain lost ground in developing cleaner, greener energy by implementing an investment allowance under the Electricity Generator Levy. Urgently finalise and legislate the hydrogen business model. Establish a route to finance for Small Modular Reactors (SMR) to ensure delivery of at least one Small Modular Reactor project to reach a final investment decision in the next Parliament. Drive private sector investment in Carbon, Capture, Usage and Storage projects by urgently fulfilling the commitment to launch the Track 2 cluster selection process to deploy at least two more carbon clusters by 2030.  

On the proposals on investment, Director of Economic Policy, Louise Hellem said:

“A six-point rise in Corporation Tax as the Super-deduction ends will have a huge impact on investment which is desperately needed to grow the economy and improve productivity. Our proposals on full expensing would see the UK back in the game on global investment.” 

On the proposals on labour market activation, Louise said:

“The Government must address the workforce challenges head on. We know many working parents limit their hours because of childcare costs and almost one in five inactive people who want to work are held back by caring responsibilities. Too many people still find it unaffordable to go back to work in the early years, so Government needs to look at providing the same free childcare provision for one and two years olds, as we have for three and four.  

“Businesses know the reason for inactivity are complex, but the measures we’ve proposed around reforming the childcare market, enabling more agile and flexible training provision, and helping prevent and treat long-term sickness are part of the solution.” 

On the proposals to help get firms ready for next winter, Louise said: 

“It’s no secret that the crisis in Ukraine has set off a chain of events that has led to sky high energy costs for businesses and households. Prices are highly likely to remain elevated next winter too, so helping businesses of all sizes to invest in energy efficiency will be invaluable come later in the year. Our proposals will help boost domestic energy security and supply.” 

On the proposals on boosting green growth, Louise said:

“The UK now has one of the lowest proportions of public spending to address climate change of many comparable global economies. France has committed over twice- and Germany over four-times as much. CBI research has found that across a range of high-potential green technologies, the UK’s market share has declined in the green opportunities we should be capturing, equivalent to £4.3bn in total projected lost value by 2030.”  

Full Budget proposals can be found here.