Encourage firms to invest in people and plant

Chancellor George Osborne should use Wednesday’s budget to encourage businesses to invest in new employees, plant and machinery, according to a leading Lancashire business adviser.

Damian Walmsley, Partner at Moore and Smalley, believes businesses would be more willing to invest cash reserves if government addressed the uncertainty over tax breaks and made it cheaper for firms to take on new staff.

A key incentive to investing in plant and machinery, known as the Annual Investment Allowance, is due to reduce from £250,000 to just £25,000 at the end of 2014, meaning businesses could miss out on vital tax relief.

Damian said: “There is evidence to suggest that a growing number of businesses have emerged from the recession in healthy shape and are sitting on cash ready to invest in new growth opportunities when the timing is right.

“The chancellor needs to create an environment where firms feel confident in spending these funds, growing their businesses and boosting the economy at the same time. The Annual Investment Allowance issue needs looking at as a matter of urgency and I would like to see him suspend indefinitely the planned reduction in the allowance, or at least not cut it so severely.”

And while a new £2,000 employment allowance takes effect from April, reducing the amount of employer National Insurance contributions (NICs) firms have to pay, NAME believes there should be a greater range of incentives for businesses that take on new staff.

He said: “The employment allowance will help businesses reduce their tax bill, but there is no guarantee those savings will be reinvested into creating new jobs. Direct tax breaks and other incentives for businesses creating new jobs might provide a better boost for the economy.”

A poll conducted by Moore and Smalley ahead of the budget found that 44 per cent of business owners would like to see a cut in the rate of employer National Insurance contributions. 25 per cent want to see a further cut in corporate tax rates, 19 per cent want more investment in apprentices and skills, while 12 per cent want more incentives for investing in new plant and machinery.