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ICAEW letter to the Chancellor

Two weeks before the final Spring Budget, ICAEW CEO Michael Izza has written to the Chancellor of the Exchequer, outlining key areas ICAEW believes he should be addressing, including: adopting a productivity target for the country; introducing an export voucher for small business; and creating a balanced regulatory environment to encourage productivity led-growth.

Productivity Now

Read the full 'Productivity Now' report which ICAEW has sent to Philip Hammond alongside this letter ahead of the Spring Budget 2017.

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21 February 2017

Rt Hon Philip Hammond MP
Chancellor of the Exchequer
HM Treasury
1 Horse Guards Road

Drive productivity through export growth and better regulation 

In your Davos speech, you identified productivity as one of the main challenges facing the UK economy. I believe the Spring Budget is an historic opportunity to put productivity growth at the heart of policy-making to ensure long-term prosperity beyond Brexit.

Our members lead and advise more than two million businesses in the UK. From micro-businesses to multinationals, ICAEW Chartered Accountants provide business and productivity advice on a wide range of issues. Every day they are helping UK plc make decisions about investment, recruitment and business strategy.

As Chartered Accountants, we know that what is measured matters, which is why we believe the UK Government, like that of Singapore and other countries, should now adopt a productivity target. I enclose with this letter a copy of ICAEW’s Productivity Now report, which provides further detail on the concept of a target.

Drive productivity through export vouchers

I believe the UK must become the best place in the world to start and grow a business. This will only be achieved through driving up productivity. We know that businesses that export are more productive and international trade is central to the UK’s future economic prosperity.

ICAEW supports the Government’s export initiative and, in particular, the efforts made by the Department for International Trade. However, in many cases exporting remains beyond the reach or even awareness of most businesses.

ICAEW member research shows that the number of UK businesses exporting has not changed in the last two years; only 53% of businesses surveyed are exporting – no change from 2014 – and nearly all (96%) of non-exporters have no plans to sell overseas in the next 12 months.

For many new or prospective exporters, exploring overseas opportunities is costly and fraught with risks.  Exporting requires capital upfront for expanded production, advice and research into new markets – these are substantial costs that businesses may not recoup in the short term and can act as a deterrent.

  • Government should introduce an export voucher for small business, to incentivise potential exporters and reduce the upfront costs. ICAEW member feedback suggests SMEs would be incentivised to trade overseas by some kind of financial support to help them take the first steps to exporting. Following the success of Growth Vouchers, which provided a small subsidy for business, we believe the same principle should be applied to help businesses export. 

Drive productivity through better regulation

We recognise the importance of regulation in a modern economy and Government must focus on coherence and proportionality. However, the cumulative effect of the apprenticeship levy, Making Tax Digital and the duty to report payment practices, combined with Brexit, have the potential to hold business back.

Concerns over the time commitment required from a growing compliance list, or the confusion caused by the sheer churn in new regulation, all create an environment which does not incentivise the kinds of productivity-enhancing investment the Government wants business to carry out.

For these changes to have the best effect they should be implemented across a 10-year period or longer; it is a challenge that spans more than one Parliament. Pushing ahead regardless would only serve to damage the UK’s productivity when the focus should be on ensuring that businesses are in the best possible place to compete globally.

  • Government must create a proportionate and balanced regulatory environment to encourage productivity led-growth. This should include more resource to the Regulatory Policy Committee to allow them to better measure the impact of new regulations and provide more comprehensive guidance on how, and when, it should be implemented.

I look forward to the opportunity to discuss this in more detail.

Yours sincerely

Michael D M Izza
Chief Executive, ICAEW