ICAEW has reiterated its call on the UK government to commit to no further business tax increases this parliament, after it found many business leaders would cut investment or jobs if there were increases in the upcoming Budget.

In a speech at ICAEW’s Annual Conference today (17 October), Chief Executive Alan Vallance shared the results of a survey of more than 650 business leaders that ICAEW conducted over the summer. 

When asked how their business would respond to further tax rises in November’s Budget, 56% said they would cut staff or freeze recruitment, 45% would consider raising prices and 39% would reduce investment. 

While around two-thirds (64%) of those surveyed said they would look to partly absorb the impact of higher costs through lower profit margins, ICAEW believes that this is likely to further weaken business confidence which is already at a three-year low.

Of those surveyed 80% confirmed that their business had already been negatively impacted by significant rises in business costs, most notably the increase in national insurance in April. Close to one-quarter said the impact had been “very negative”.

“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,” said Vallance. “The reality is that Britain faces a damaging cliff edge if the Chancellor decides to raid businesses again at next month’s Budget.”

Tax impact already being felt

The survey results also revealed that firms have already made cuts in light of this year’s tax increases.

Close to half of those surveyed (46%) confirmed that their business had cut jobs or frozen recruitment due to the rises in April. One-third had increased prices and 23% had reduced investment.

The tax rises have been most keenly felt in the transport and storage and manufacturing and engineering sectors. All of those surveyed working within transport and storage said their firms had been negatively impacted, and 89% of those in manufacturing and engineering.

Vallance said: “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.”

Action needed on growth

Addressing ICAEW members ahead of a speech from the Bank of England’s Chief Economist Huw Pill, Vallance expanded on the barriers facing UK businesses, drawing on members experience and expertise.

“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,” he said.

“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.”

Vallance went on to highlight ICAEW’s recommendations to government to enable business-backed growth, which include:

• no further business tax increases this parliament;
• publication of a long-term tax roadmap;
• consulting on a path to a single rate of VAT; and 
• reforming or replacing business rates. 

He concluded: “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.”