CPA Bulletin

28 CPA Bulletin > November 2022 www.cpa.uk.net While the recent plotting and gossip around Westminster has helped fill news reports, the UK’s business community is looking at the bigger picture and what the current state of the economy means for the coming year. Already fragile given worries about cost of living, rising interest rates and the wider, global picture, for construction, the ongoing concerns about material supplies and investment intentions means there were already concerns the construction sector was already in recession. The recent issues and outlook for the UK will have done very little to allay these concerns. When the former Chancellor Kwasi Kwarteng published his mini-Budget at the end of September, from a business perspective, there were some welcome steps. Moves such as permanently making the Annual Investment Allowance set at £1m per year, along with planning reform and the creation of investment zones, were positive first steps in creating the right conditions for achieving the government’s aim of 2.5 per cent annual economic growth. This came after the government had announced its plans to support both business and households with their energy bills, as part of its energy support package. In the weeks since, the political narrative has changed, with talk of a new round of government austerity, most of the headline measures announced in the mini-Budget now dumped, and further pressures placed on businesses and households in the coming months. If we are to assume calming the markets and achieving a degree of economic and political stability remains the priority for the new Prime Minister, the focus on growth remains critical. How can that best be achieved now? Undoubtedly there have been several well documented external factors that have impacted the economy. When the former Chancellor but one (Rishi Sunak in case you have forgotten) formulated his plan to remove the red diesel rebate for construction plant back in the Budget of 2020, he could not have forecast that when it came into effect, Russia would invade Ukraine, pushing up oil prices to levels not seen in modern times. On the back of an economy still trying to recover from the effects and fall out from the global pandemic, clearly there were headwinds impacting on the UK’s growth prospects and short-term economic future. But these remain longstanding structural issues within the economy that need addressing by governments of whatever colour. Not just now – but after the next general election. Productivity, or lack of it, remains a problem for the UK and one which remains unresolved. A well-established issue dating back to before the 2007/2008 financial crisis, while there have been countless studies and research papers on why UK productivity continues to lag behind other G7 competitors, the solution goes hand in hand with another issue which the UK has grappled with - lack of sustained, long term investment, in both the private and public sectors. UK business investment has been lower than other G7 countries for many years. This is not new news for policymakers, with the failure of many industrial sectors to invest enough in new technologies, machinery, equipment, innovations and research highlighted in many research reports and papers, both from within government, but also from think tanks and policy units. Governments from both sides have tried to address the investment problem, with a series of measures which have had varying degrees of success. Research and Development tax credits, freeports, skills and training vouchers have all been announced and introduced at some point over the last 20 years. Yet even so, the issue remains, and while politics is played out in electoral cycles, these measures and initiatives need far longer to bed in and properly come to fruition. Plant-hire firms, like most companies, think and plan ahead in years, and while the construction industry has shown itself to be nimble and quick footed (our response to the challenges of the pandemic reinforced this), ultimately we need government policies that are consistent in their application, with a stable fiscal and economic environment key to fostering growth. Back in the summer, the CPA responded to a Treasury consultation on the UK’s investment climate and the steps needed to improve the current outlook. The Treasury’s focus was how to enhance the current tax reliefs in place, and what changes could be POLICY: 1 POLICY Going for Growth? The Challenges Facing Prime Minister Sunak Halfway through the recent CPA Annual Conference, the not unexpected news came through, that the Prime Minister, Liz Truss, was stepping down. Rishi Sunak, the failed Conservative Party leadership contender just weeks ago, has now inherited the role, becoming the UK’s third Prime Minister in 2022.