Tax incentive cuts could stifle business investment, warns Price Bailey MD

“The purpose of doing an investment is that you make money on it, you get a return. It takes a year, two, three years to get that return. And what will the tax situation be under this government? We keep hearing that taxes need to go up.”

Martin Clapson, Managing Director at Price Bailey, an APA member firm, who is also the current Chairman of the APA, shared his insights on this issue in an article in The Times  this week. He emphasised the uncertainty business owners are facing, particularly regarding future tax policies:

This sentiment is echoed by the broader economic context. The UK has recorded the lowest rate of total investment among the G7 advanced economies for 24 of the past 30 years. A recent study by Demos, a cross-party think tank, highlighted that the ratio of private sector capital investment has fallen in relation to public spending over the past two decades. In 1997, businesses spent £5 on capital investment for every £1 of public sector investment; today, that figure has dropped to £3.12.

Clapson further questioned the potential for economic growth if both the public and private sectors continue to underinvest:

“Where is this growth going to come from if neither the public nor private sectors are investing?”

He called on the Chancellor to use the Autumn statement as an opportunity to demonstrate the government’s commitment to supporting entrepreneurial SMEs, rather than viewing them as a source of revenue to bolster public finances. Clapson advised that the government should either ensure tax reliefs on investments or reduce the taxation on profits to encourage business owners to take the risks necessary for economic growth.

Another point of concern for business owners is the emerging role of artificial intelligence (AI) and robotics in business operations. Clapson noted that while some businesses are considering investing in AI and robotics, there is hesitation due to the lack of established suppliers and the fear of making the wrong investment decision:

“They are looking at technology, AI, and robotics to do the routine stuff, but there is not an obvious supplier. You don’t want to be the first one to buy. You will let the bigger players go first and you will follow their lead. There is an element of not wanting to make the wrong decision because that will be real money wasted.”

As businesses adopt a “wait and see” approach to investment, Clapson’s message is clear: without the right incentives and a stable tax environment, the UK risks stifling its economic recovery and future growth.