More than half of Britain’s mid-sized businesses expect their tax bills to rise as a result of the change in the Labour leadership, and just 13 per cent believe the new regime will bring them down.
The findings come from the latest Mid-Market Tracker published by accountancy and business advisory firm BDO, a bi-monthly survey of 500 UK mid-sized businesses with revenues of between £10m and £500m.
Some 54 per cent of respondents said they expect business taxes to go up under the new leadership. Almost a third, 32 per cent, expect them to remain at current levels until the end of the Parliament, while 1 per cent were unsure.
The figures land at a delicate moment, with business leaders already demanding an end to “drift and delay” as the change at the top of government leaves firms bracing for yet another period of political uncertainty.
The survey follows the release of BDO’s Mid-Market Manifesto, which sets out a series of policy recommendations designed to drive growth across Britain’s mid-market business sector.
The stakes are considerable. Despite comprising less than 1 per cent of private sector businesses, the UK mid-market accounts for more than one in three private sector jobs and more than 40 per cent of private sector revenues, an outsized contribution that owners of growing firms will recognise all too well.
Chief among BDO’s recommendations is a proposal to simplify corporation tax by scrapping the current main rate and marginal relief system in favour of a single rate of 21 per cent, just below the EU average of 21.6 per cent.
For entrepreneurs whose profits currently hover in the marginal relief band between £50,000 and £250,000, the appeal is obvious. BDO argues a simpler regime would support investment by reducing uncertainty, lowering compliance burdens and giving businesses greater confidence over the tax implications of growth.
Paul Townson, BDO tax partner, said: “It’s clear that many businesses are concerned about the tax implications of the change in the Labour leadership. This is at a time when many are already struggling with both high taxes and high compliance costs.
“However, the incoming administration has an opportunity to do some fresh thinking on how best to drive growth in the UK economy which has recently proved elusive.
“Currently the UK tax code is too long, too complex and in urgent need of simplification.
“Simplifying the corporation tax regime with a single rate of 21% would incur a cost but we believe this would be offset by the benefits gained from incentivising investment and the resulting increase in tax revenues generated through supporting long-term employment.”
Tax is not the manifesto’s only concern. BDO also calls for measures to address skill shortages across sectors and regions, including protecting access to apprenticeships for priority technical skills, more flexible training for mid-market firms and prioritising the roll out of the government’s proposed “clearance-style” apprenticeship pilot scheme, proposals that build on the £725m apprenticeship reform package announced last December.
The manifesto rounds off with sector-specific suggestions for several of the growth-driving sectors identified in the government’s Invest 2035 Modern Industrial Strategy, where the UK has or could develop a competitive advantage: advanced manufacturing, life sciences and professional and business services.
Whether the new occupant of Number 10 is listening remains to be seen. For now, business owners planning investment decisions would be wise to pencil in the possibility that the tax burden heads in only one direction.
