CBI demands action to promote UK investment

By This Is Money
Updated: 08:48 EDT, 19 April 2011

Britain's biggest business group said tax cuts and the destruction of 'stumbling blocks' are urgently needed if the UK is to bolster its jobs market with a healthy, competitive level of foreign investment.

CBI: 'It is worrying how many business leaders are telling us that the UK no longer holds the same attraction'

The CBI warns Britain's reputation as a place to do business is threatened by its 50% personal tax rate, a skills shortage in science and maths and excessive regulation.

'With competition for international capital so fierce, the government must play up our strengths and remove the stumbling blocks to investment,' said CBI Director-General John Cridland.

'Time isn't on our side and we have less than five years to turn things around.'

The CBI is calling on the government to reduce the top personal tax rate as soon as the public finances allow, plus the further reduction of corporation tax to 18%. It also wants it to invest more in skills, infrastructure and low-carbon technologies.

Recommendations include more support for business-led academies and apprenticeships, cutting red tape to fast-track planning processes, and the speeding up of regulation for clinical drug trials.

'It is worrying how many business leaders are telling us that the UK no longer holds the same attraction it once did, and are questioning whether they need to be here at all,' said Cridland.

The survey was based on answers from 400 firms across the UK, and Cridland's sentiments were echoed by business leaders including Paul Booth, chairman of SABIC UK Petrochemicals, who said the government needed to clearly articulate how it wanted the British economy to look in the future.

'We have a golden opportunity to rebuild and rebalance the UK economy in an economically and environmentally sustainable way,' Booth said.

In his Budget last month Chancellor George Osborne declared 'I want this to be a place that international companies go to, not leave', and promptly cut corporation tax by a more-than-expected 2% down to 26%, with further 1% falls scheduled each year until it reaches 23%.

The cut, which would save major firms millions of pounds every day, followed a string of defections from Britain by companies which blamed the move on the punishingly high tax regime in this country.

One of these was advertising behemoth WPP, which immediately after the announcement suggested it may be tempted back.

Its chief executive Martin Sorrell told BBC radio: 'There has to be legislation enacted...(but) I think it looks as though we will make that recommendation.'

Osborne welcomed WPP's move: 'So there you have big companies coming back to the UK instead of leaving the UK and that is going to help us all with the growing economy.'

Osborne also promised to simplify the tax system and reform taxes on profits collected overseas under an overhaul of the controlled foreign company rules. And until April 2014, the government banned the introduction of any Westminster-inspired laws for start-up businesses or firms with fewer than ten employees.

The Chancellor also revealed a large tax cut for entrepreneurs who sell companies or stakes in their own firms for a large sum - where before they paid Capital Gains Tax at 10% - rather than the standard 28% - on the first £5m of their gain From 6 April, this so-called 'Entrepreneurs' relief' was doubled to £10m.