UK tax policies are restricting business growth and innovation, according to new research by UK top ten accountancy and advisory firm Azets, whose London headquarters is at London Bridge.
With just days before the Chancellor presents the Spring Budget 2024 on March 6, the Azets Barometer January 2024 survey reveals average scores of just below the neutral mark of 5 on a scale of 1 to 10 related to the UK tax regime’s ability to strongly promote (10) or inhibit (0) in key areas including business growth (4.7), innovation (4.8), sustainability (4.7), and the attraction and retention of talent (4.7).
The research suggests that, while not overly harmful, the prevailing tax environment isn’t significantly aiding businesses. The score is driven largely by smaller businesses that feel more inhibited than enterprise firms.
There is a significant disparity between the lower and upper mid-market, as businesses with a £10m-£49.9m turnover view the tax regime as broadly neutral, while those with a £50m-99.9m turnover are the most positive, with an average score of 6.4 for business growth.
Praveen Gupta, UK Head of Tax at Azets emphasised the need for a progressive tax system that benefits all businesses and promotes growth and investment in critical areas such as innovation and sustainability initiatives.
He said: “Simplifying incentives, taxes, and regulations is essential to create a more competitive landscape that rewards entrepreneurship and ambition. R&D tax credits, for example, are a key driver of innovation, but the scheme is in chaos. Businesses are paying more tax than ever, yet there is an obvious correlation between tax, regulation, and economic growth, and this ought to be a priority for this Government and the next.”
The Azets Barometer provides insight into the current and future business climate through the perspective of ambitious mid-market, owner-managed, and family-owned businesses in the UK, Ireland, Norway, Finland, Sweden, and Denmark.
The January 2023 survey is the first in a new triannual series to identify trends relating to economic outlook, financial performance, and emerging threats and opportunities. It reveals optimism among businesses, with an overall average score of 5.6 out of 10.
The UK’s economic outlook for the next 12 months scored of 5.1 out of 10, hinting at a cautious, wait-and-see approach towards prospects. Of the 323 UK respondents, 41% expressed moderate optimism with scores of 6 or above, contrasted with 35% who were more pessimistic, scoring 4 or lower, and 24% opting for a neutral score of 5. This places UK businesses as the least optimistic in the survey.
Economic (6.1 out of 10) and geopolitical (5.7) uncertainties are the highest concerns for among UK business owners, closely followed by talent recruitment and retention (5.2) and regulatory compliance (4.9).
