One of ADS’ key concerns heading in to yesterday’s Budget was that the Government couldn’t take the recovery in Business Investment for granted, and government needed to use tax reform to free up cash flow to boost investment.
As such we argued for three key tax reforms to free up cash flow to boost business investment:
- Extend Annual Investment Allowance (AIA). We pushed for the £250k Annual Investment Allowance (AIA) to be maintained for another two years and that the level of capital allowances should be raised. The Chancellor raised the AIA to £500k and extended it for another year.
- Raise the level R&D tax credits to the EU maximum. The level was raised for loss-making SMEs (but not to the EU max). There was no increase for bigger businesses.
- Reinstate the Industrial Buildings Allowance. No movement here.
The OBR has now forecast business investment to
The OBR forecast looks rather optimistic in terms of the year-on-year growth rates, especially given lingering business caution.
Hopefully, the OBR is right (finally – business investment has been their biggest forecasting error) and investment growth will start outstripping GDP growth.
