This Budget is make or break moment for UK economy, warns CBI chief

By

Vicki Owen, Financial Mail On Sunday

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Britain’s most senior business leader has warned that the recovery could be derailed if Chancellor George Osborne fails to encourage investment in Wednesday’s Budget.

John Cridland, director general of the CBI, said the Budget was a make or break moment for the economy, with tax reliefs to encourage investment an urgent priority.

Speaking to The Mail on Sunday, he declared: ‘We are at the early stages of a vital but not inevitable rebalancing of the economy. Whether we do this actually depends on whether we choose to do it. There’s nothing inevitable about it.

Plea: CBI boss John Cridland said tax reliefs are needed to encourage investment

‘The default position is that we’ll continue with an unbalanced growth pattern based on consumption.’

Cridland said that 90 per cent of the economic recovery seen last year was a result of increased consumption and businesses needed encouragement to invest to boost production and exports in particular. His call was echoed in research by accounting giant KPMG, which surveyed 161 medium-sized businesses on their wishes for the Budget. 

Almost 20 per cent said tax incentives for investing in plant and machinery would be the single most important measure the Chancellor could introduce. And 21 per cent said they needed more help exporting to overseas markets, while  22 per cent said they would like steps to allow them to put more money in their staff’s take-home pay by cutting employers’ National Insurance contributions, which could be passed on to workers.

Cridland said the most important step would be to extend the Annual Investment Allowance, which lets businesses offset up to £250,000 on capital investment each year against tax bills. The scheme is due to expire at the end of this year, but he said it should be extended because now was the critical moment to encourage business to invest.

‘I have spoken about it with the Chancellor and think he was quite interested,’ Cridland said, adding he had no inkling whether it would be included in this year’s Budget.

The CBI’s other key demand is for a freeze on the controversial carbon tax, known as the Carbon Price Floor. Big polluters are charged £9.55 for every ton of carbon they emit and the figures is set to rise steadily over the next five years. The levy is passed on in energy bills, currently at about £5 a year.

Cridland said: ‘The heavy lifting [high cost] at the moment is on British business and it’s making us uncompetitive with French and German business. The gap between the [carbon] price in Britain and the price in France and Germany is just getting unbridgeable. I’ve suggested the Government changes the trajectory of the Carbon Floor Price.’

The CBI says the Government should freeze the UK carbon price from 2015-16, at a cost of £90million. It is likely to be granted its wish. As reported by The Mail on Sunday in January, industry insiders are convinced the Chancellor will freeze the levy at next year’s level of £18.08 a tonne, though some are lobbying for a freeze at the current lower level.

Comments (12)

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Sally,

London, United Kingdom,

1 hour ago

He talked today about encouraging a return to manufacturing – but has he put anything in place to encourage this? Tax incentives, anything?

campolife42,

Alicante, Spain,

10 hours ago

Consumption = debt and that’s the basis of the economy.

Werneth,

Manchester, The Democratic Republic Of Congo,

10 hours ago

Cloud cuckoo land

robert,

kent, United Kingdom,

11 hours ago

What absolute common sense to “encourage investment” and that starts with redressing the foolishness that is “emergency low interest rates and the continuing encouragement of cheap borrowing” in a vain attempt to prop up an ailing economy.

m22,

Suffolk by the sea, United Kingdom,

6 hours ago

Err no, low rates are there for exactly thus reason, to encourage investment. Next you’ll be saying this carbon rubbish is a good idea and should be hiked as well.

javamann,

Chichester,

14 hours ago

The £50,000,000 a day that goes to Euroland, would help!

philjudo,

Birmingham_Uk,

20 hours ago

Our financial whizz kid Gideon armed only with his history degree will save the country, watch out there are lots of flying pigs around this week.

Paul,

London, United Kingdom,

4 hours ago

Plus his GCSE in folding towels

John,

London,

21 hours ago

George wants us to invest all our cash in property; interest free deposits for 5 years and guarantees for purchases up to £600,000. Just leave all that making stuff for exporting to the Germans … surprise surprise our exports are decreasing and imports increasing. The only growth in the UK is in national debt and house prices.

2 of 3 repliesSee all replies

Paul F,

Leeds, United Kingdom,

3 hours ago

Some truth in most comments but would you prefer growth or recession in the UK economy? House prices will continue to rise in London and the Southeast until we build more houses (on flood planes?) or until the North/South divide is addressed! At least the construction industry has been brought back from the dead and much of the consumer spending is on kitting out new homes hence benefitting retailers and manufacturers. Although employment has held up, it has been at the expense of productivity and we still lag behind other European countries and USA! So I would agree with the CBI call for capital investment incentives to be continued and expanded – only when we can match EU productivity can we experience real wage growth and compete in global export markets!

the truth,

wrexham, United Kingdom,

2 hours ago

first you need capital , if you have low interest rates , you only encourage people to borrow , the other point is the banks a struggling to keep 3% capital in their banks , they have loads of liquidity , they have no capital

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This Budget is make or break moment for UK economy, warns CBI chief