In a speech to an audience of around 650 chartered accountant members and other business leaders at ICAEW’s flagship Annual Conference in central London, Vallance will say that the uncertainty, difficulty and cost of doing business is holding back growth in Britain.

Vallance will challenge the government to prove it is firmly on the side of enterprise by giving businesses what they need to invest, hire and innovate, as he unveils a survey of 659 business leaders showing the likely impact of further tax rises in next month’s Budget:

The research found that:

• over half of businesses (56%) would respond to further tax rises in next month’s Budget by cutting staff or freezing recruitment, while one in two (45%) would consider raising prices and two-fifths (39%) would reduce investment
• construction (63%) and retail and wholesale (62%) firms are most likely to reduce headcount and freeze hiring in the event of further tax rises
• around two-thirds (64%) of firms would look to partly absorb the impact of these higher costs through lower profit margins, likely to further weaken business confidence.

This comes after 80% of businesses said they were negatively impacted by April’s major rise in business costs, notably the increase in national insurance, while nearly a quarter said the impact on their company was “very negative”. Transport and storage (100%) and manufacturing and engineering (89%) sectors have the highest proportion of firms negatively impacted, the survey found.

In response, nearly half (46%) of firms responded by cutting jobs or freezing recruitment, a third (34%) increased prices and one in five (23%) reduced investment.

ICAEW – whose members advise over three million UK businesses – will call on the Chancellor to use next month’s Budget to boost confidence and unlock economic growth:

1. Ending the uncertainty – including through an iron-clad commitment to no further business tax increases this parliament and publishing a long-term tax roadmap.
2. Making doing business easier – including starting a consultation on a path to a single rate of VAT with minimal exemptions.
3. Cutting the cost of doing business – notably through reforming or replacing business rates with a system that encourages businesses to invest in growth and improved productivity.

In his conference speech, Alan Vallance, ICAEW Chief Executive, will say:

“Policymakers talk a lot about growth, but the businesses trying to deliver it are being held back.

“Businesses face too much uncertainty with frequent rule changes and mixed messages on tax make planning impossible, leaving firms wary of making long-term investments. Complex VAT systems, and ever-dwindling HMRC service standards continue to help make it too difficult to do business.

“Firms also tell us it’s too expensive to do business, with confidence in free-fall over skyrocketing operating costs amid high taxes, an outdated business rates system and soaring energy bills.

“The UK now finds itself at an economic inflection point ahead of a crunch Budget. We know that businesses stand ready to drive growth forward, and will do so once they’re given the tools, incentives and opportunities.”

Commenting on the survey results, Vallance added:

“Tax is holding back growth, so it’s only natural that growing fears over more tax hikes in November are choking off investment, hiring and innovation. The reality is that Britain faces a damaging cliff edge if the Chancellor decides to raid businesses again at next month’s Budget.”

“Business confidence is fragile, investment is stalling, and everyday decisions are being slowed by complexity, cost and uncertainty. If the UK is to deliver on its growth mission, it’s time to give businesses what they need to make it happen.”

ENDS

Notes to editors:

1. The full text of Alan Vallance’s speech is available on request.
2. 659 telephone interviews were conducted from July to September with senior UK business professionals (ICAEW Chartered Accountants) working in all types and sizes of business, across every economic sector and UK region. Businesses were asked about their response to higher business costs in April, including the rise in national insurance, and how they would react to further tax increases at the Budget. Respondents were able to select multiple options
3. The theme of today’s ICAEW Annual Conference is Thriving in Transformation, examining how accountants and businesses can thrive in a rapidly changing economic environment by balancing technological advancements with the human insight, advancing climate goals and inspirational leadership. Speakers include: Bank of England Chief Economist Huw Pill, former Secretary of State for Education Justine Greening and England football legend and UEFA Women’s Euro 2022 winner Jill Scott MBE.
4. A record 60% of firms cited the tax burden as a growing concern in the latest ICAEW Business Confidence Monitor survey, in which sentiment UK-wide toppled to a new three-year low in Q3.