Britain must cut business tax and sort out skills, says CBI

The business group says that UK plc has 'less than five years' to make itself more attractive to foreign investors. Tick, tock...

by James Taylor
Last Updated: 19 Aug 2013
The UK is losing its appeal to foreign investors - and unless the Government takes rapid and pretty drastic action, the situation is going to get a lot worse, according to a new report by the CBI. The lobby group has been speaking to business leaders about the pros and cons of investing in Britain, and although they praised our 'historical legacy' and good labour relations, they were much less impressed with our business taxes, regulatory burden and skills shortages. At a time when we desperately need this kind of inward investment to drive the recovery, that means it's high time Britain raised its game...

The CBI points out that foreign direct investment in the UK has plummeted in the wake of the financial crisis - from $186.4bn in 2007 to $45.7bn in 2009 - whereas in China, for example, the pace of investment has barely slowed at all. As a result, Britain has now slipped from second in the global investment table (behind the US) to fourth (behind the US, China and, horror of horrors, France). Since consumer spending is in the doldrums, and the Government is actually spending substantially less, the CBI says we desperately need this investment to drive economic growth and create jobs.

So what are the 'blockers' that are making international companies hesitate about investing here, and even making those who are already here think about going elsewhere? Well, business taxes are a big part of it, the CBI reckons. It applauded the Chancellor's decision to cut corporation tax - but it wants him to go even further, down to 18%. It also (again) slammed the 50p tax rate, which it says makes it harder for Britain to attract internationally mobile talent. And it wants the Government to focus on reducing business taxes across the board.

Regulation is, inevitably, another bugbear. The CBI quotes World Economic Forum data suggesting that the UK is ranked 89th out of 139 globally for its regulatory burden on business - putting us on a par with the likes of Nigeria. And on a broader point, the CBI says we need more certainty and stability when it comes to policy - things like that unexpected North Sea windfall tax just make foreign investors nervous, it says.

But skills shortages are arguably the biggest problem; CBI boss John Cridland reckons sorting out education and skills 'is probably the most important thing the Government can do'. As MT has been discussing a lot recently, we're still lagging behind in both basic skills and the higher-level science, technology and maths qualifications that are essential to many value-added industries. Boosting the calibre and status of vocational training is also a must.

Still, we shouldn't get too down-hearted, because Britain does have an awful lot of advantages. As the CBI points out, we have a flexible labour market, a good 'innovation ecosystem' (helped by our world-class universities, which include four of the world's top ten); some world-class industries (for example the creative industries) and some natural advantages that should help us win in the growing area of low-carbon technology (i.e. it's wet and windy).

But countries around the globe are competing ever harder for business investment. If we want this money, the Government needs to be seen to be bending over backwards to encourage it...

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