CBI conference: Theresa May’s pitch to business
In a speech at the annual CBI (Confederation of Business Industry) conference, Theresa May made her pitch to business. It was always going to be a balancing act to encourage and reassure business – the vast majority of which, objected to Brexit. Her pitch seems to focus on two main points: lower corporate tax and increased investment in research and development (R&D). She also responded to calls for a ‘transitional’ deal.
UK to have the lowest business taxes
Now we want to go further, and look at how we can make our support even more effective – because my aim is not simply for the UK to have the lowest corporate tax rate in the G20, but also a tax system that is profoundly pro-innovation.”
Theresa May at CBI Conference
For businesses, lower taxes is obviously a plus. But if the UK does give up access to the single market, would it be enough to counter the costs of leaving?
More tax breaks for businesses will also be a harder sell to the public where everyday living costs are increasing.
Boost for investment in R&D
In the autumn statement on Wednesday, we will commit to substantial real terms increases in government investment in R&D – investing an extra £2 billion a year by the end of this Parliament to help put post-Brexit Britain at the cutting edge of science and tech.
A new Industrial Strategy Challenge Fund will direct some of that investment to scientific research and the development of a number of priority technologies in particular, helping to address Britain’s historic weakness on commercialisation and turning our world-leading research into long-term success.
And we will also review the support we give innovative firms through the tax system.”
Theresa May at CBI Conference
This is perhaps a more hopeful strategy for attracting business. In response to the speech, Anthony Lalsing, corporate tax director at Menzies LLP told the Telegraph “While this (corporate tax cut) would be a boost for business and help to offset Brexit uncertainties, it would not make a massive difference to net profits. Further incentives to promote investment in research and development and encourage innovation could deliver much more of a difference. There is a strong link between innovation and growth.”
A transitional deal?
At the conference, CBI President, Paul Drechsler, called on Theresa May to ensure a “smooth Brexit” process. He called for a transition period whereby the UK would keep access to the single market and its rules to avoid a “cliff edge” scenario.
Business needs to know we won’t close our borders to Europe’s talent, or lose our privileged access to Europe’s markets. And there’s another important question: what happens on the day after Brexit, when the clock strikes midnight, and our two years’ negotiating time is up? Today, businesses are inevitably considering the cliff-edge scenario – a sudden and overnight transformation in trading conditions.
If this happens, firms could find themselves stranded in a regulatory no man’s land.
So – for many firms it’s not about a ‘hard’ or ‘soft’ Brexit, but a ‘smooth’ Brexit, which avoids these cliff edge problems.
The government should build on the positive moves it has already made to dispel uncertainty by drawing up plans for a smooth transition, giving firms both the time to adapt to new regulation and the confidence to invest beyond 2019.
Paul Drechsler, CBI President
In response, Mrs May said that the government’s negotiation with the EU would focus on getting “the arrangement that is going to work best for the UK and the arrangement that is going to work best for business in the UK.”
The Guardian has more on the CBI conference in their live coverage.
As time progresses, the prime minister’s challenge of making a success out of Brexit looks ever harder. We don’t know yet what she has up her sleeve (or if she has anything up there). It may well be a genius plan that does the impossible. Could the UK have full, tariff-free access to the single market AND have immigration control? Perhaps Boris could get us some free prosecco too. As Philip Hammond might say, she faces a “sharp challenge”.
More to come from the Autumn Statement
We can expect to hear more on the government’s strategy for business when the Chancellor gives his Autumn Statement on Wednesday 23 November.
Image: Theresa May
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