UK tax system holds us back, top firms warn

Nearly half of UK businesses have said the nation’s tax regime is “unfavourable” and puts the UK behind China and other competitors.

Manufacturers are pushing for major business reform in next month’s Autumn Budget – lifting the economy “out of its current slump”.

The call comes after research published by Make UK, a manufacturing group, and RSM, a consultancy, revealed shaky confidence in the system.

Almost half of companies surveyed (44 percent) believe the UK has an unfavorable business tax and regulatory environment, with 28 percent seeing it as less favorable than China.

Many think it is worse than the US (27 per cent), Germany (26 per cent), France (23 per cent) and Italy (21 per cent).

‘Unfavourable’: Manufacturers are looking for major business reform in next month’s Autumn Budget

Businesses called for simplification of incentives, taxes and regulations. These include promoting a competitive system of corporate taxation and tax credits for research and development in the UK.

An analysis by tax expert Dan Needle recently revealed that companies are paying a greater proportion of their profits to the Treasury than they were in the 1970s.

Chancellor Jeremy Hunt said last week he would choose business tax cuts ahead of any other area, but warned “we are not in a position to have that discussion at the moment”.

Fhaheen Khan, senior economist at Make UK, said: “Manufacturers are clear that many aspects of the current tax and regulatory system are not fit for purpose and are failing to encourage vital investment.

“We cannot continue with the current policy reversals and inconsistencies if we are to shake the economy out of its current doldrums and foster long-term growth.” The government should start by carrying out an urgent review of the current disadvantageous regime to make it work for business.

Mike Thornton, head of manufacturing at RSM, said: “The link between tax and regulation and economic growth is clear. Yet UK manufacturers find the framework a burden – putting the UK industry at a disadvantage.”

The comments come as a separate report from consultancy group BDO, which also warned that business confidence, output and hiring intentions continued to fall in September.

Kaley Crossthwaite, partner at BDO, said: “With the threat of recession, businesses are understandably feeling the pressure.

“More needs to be done to offer support to businesses.”