Peter Edgar is Chief Financial Officer at Huboo, a pan-European fulfilment technology provider. In this guest post today, he argues that investment and export incentives are needed to curb the mounting pressure on the UK economy
Why investment and export incentives are needed to curb the mounting pressure on the UK economy
Depending on the prevailing economic headwinds, the role of Chancellor of the Exchequer can either be a highly-coveted or highly-unenviable position within Government.
With the pandemic still disrupting businesses and supply chains, an illegal war creating unpredictable economic repercussions, energy costs spiralling, and wider inflationary pressures across every sector, there’s certainly a lot on Rishi Sunak’s plate as he prepares his Spring Statement.
This ‘cost of living crisis’ looks set to inflict pain on businesses and households for the whole of 2022 – most likely beyond – leading many commentators to predict that further Government intervention will be forthcoming on March 23rd when the Chancellor addresses the House
A substantive growth strategy
But while support for the most acutely affected households should be welcomed, we must also be realistic about the challenges awaiting us. Sustained, across-the-board price rises are inevitable due to a combination of structural, circumstantial and geopolitical challenges that are largely beyond the Government’s immediate control. This is no time for sticking-plaster solutions or headline-grabbing handouts that simply kick the can a little further down the road.
Admittedly, it seems everyone apart from the Treasury would appreciate a delay to the planned National Insurance increase. Like many companies, we’re boosting our warehouse team pay to protect take-home pay and ensure no one loses out when the tax hike comes into effect. In reality, we would prefer this money to be invested into growing our business for the long term benefit of our warehouse staff and wider workforce.
Beyond this correctional move, however, we’re looking for the Government to get on the front foot and use the Spring Statement – too often an underwhelming event in the political calendar – to lay out a more comprehensive strategy for how UK plc can invest its way out of its crisis.
There are many different options open to the Chancellor to encourage growth, investment, and innovation, but here are a few specific proposals we’d welcome.
Developing the workforce – and the workplace
Firstly, the Government should increase the Apprenticeship Levy from 0.5% to 1% to encourage more firms to invest in workforce skills development. Lower-income households are being disproportionately affected by the cost of living crisis, and skills development represents by far the most sustainable pathway towards creating higher paid jobs.
Currently, the Levy is paid by all companies with an annual payroll of £3+ million. These firms should have little problem stomaching a minor increase in contributions. The scheme’s big advantage is that all companies can access it to train and develop their team members, regardless of whether they’re eligible to contribute or not, and the Government also tops up every employer contribution, greatly increasing the size of the overall pot.
Alongside this, we’d like to see the reintroduction of a loan guarantee scheme that facilitates innovation- and growth-oriented lending to viable businesses that the banks would otherwise turn down due to a lack of security or a proven track record.
Understandably, the Government’s recent focus has been financial support to offset the damage caused by the pandemic – for example, through the Coronavirus Business Interruption scheme. However, now is the time to shift the emphasis towards innovation and growth. We’d like to see the Government committing to underwrite bank loans for businesses in need of capex or working capital, or those looking to invest in R&D. It could open up a vital tranche of additional funding for 10,000s of viable startups whose business models make them unsuited to other forms of private investment (such as VC funding).
Rekindling our appetite for EU trade
In our business, we’ve spent the past two years growing our footprint across mainland Europe, giving us first-hand insight into the challenges of post-Brexit EU/UK trade, but more pertinently, the fantastic opportunities that still exist for British companies looking to expand across the continent.
Encouraging EU exports has become unfashionable in the current climate. Yet, the EU is still our most immediate and valuable trading partner, and 1,000s of businesses would benefit from better Government support/resources to ease the pathway to European expansion.
The Spring Statement would be the perfect moment for the Government to make such a commitment, for example, by offering tax breaks for businesses investing in EU trade. These could be modelled on the existing framework for R&D tax breaks, rewarding companies that invest in infrastructure or marketing to fuel their expansion efforts.
Alongside this, the Chancellor could also consider offering contributions towards firms’ European administrative setup – for example, VAT and company administration – or improving access to trusted cross-border partners capable of supporting businesses with their European legal, regulatory and tax affairs.
Even informational support, such as educational resources and business toolkits specific to EU countries and sectors, would be welcomed by fast-growth companies as they seek to understand the different market opportunities available to them.
Fighting off troublesome headwinds with growth and innovation
After several tricky and unpredictable years in which countless businesses have been forced to curb their growth ambitions and weather the storm, what UK plc needs most right now is the encouragement to invest. Investment to stave off the current, damaging headwinds and create more, better-paid jobs. Investment to get more British businesses exporting to the largest economy on the planet. And investment to encourage genuine enterprise-building, rewarding the entrepreneurs willing to take a risk to realise their vision.
So while the Spring Statement might be generally regarded as a ‘mini budget’, this year it’s the ideal platform to unveil a bigger, bolder vision for stimulating UK growth and strengthening our economic foundations – helping limit the impact of this, and any future, crisis.