Chancellor George Osborne should use his final budget before the general election to help Britain’s medium-sized firms while sticking to his deficit-cutting plans, the business lobby group CBI has said.
CBI director-general John Cridland says the UK’s equivalent of Germany’s widely praised group of companies known as the Mittelstand, are the “backbone of the UK economy” and should be allowed to grow further with investment support, export help and a simpler tax system.
The CBI’s big requests from the 18 March budget include:
· Greater availability of long-term growth capital with a market for privately placed debt.
· More to encourage wider research and development (R&D) activity, by enhancing the R&D tax credit to include the final manufacturing of prototypes.
· A commitment to reduce the supplementary charge on North Sea oil producers.
· Free childcare (currently 15 hours) extended to one- and two-year-olds “if funds are available”.
Cridland commented:
This is a good opportunity for the chancellor before the election to support growth and investment well beyond the election, providing stability, certainty and simplicity for the UK’s Mittelstand to get themselves on the front foot.
“So the chancellor must reward growing, ambitious firms with the tools to get on with the job of rebalancing the economy and lift productivity. There has been good progress on this front from the government, and the chancellor can now take further action to boost investment and innovation.”
On R&D, Cridland added:
Innovation is fundamental to long-term growth and creating more high-skilled jobs in the economy. If we want to really get the full benefit of the great work going on in labs and workshops up and down the country, we need to encourage more firms to build their prototypes here in the UK.
There is a growing pattern of re-shoring production back home and a super-charged tax credit could help keep that ball rolling.
The CBI is calling for a fiscally neutral budget, expecting further austerity to pay for any extra help for business.
The business group said its package costs £0.6bn in 2015-16, before rising to £1.6bn in 2019/20 – excluding the cost of the childcare proposals. “These policies should be funded through efficiency savings in the short run and reform of public services over the course of the next parliament,” it said.
Its focus on Britain’s medium-sized companies follows a study suggesting such firms are more than a match for the German Mittelstand, which is lauded by politicians and business leaders as the template for economic growth.
The report by HSBC said the UK’s “Brittelstand” of middle-market companies make up 17.2% of economic activity, compared with 16.3% in Germany and 13.2% in the US.
