Britain will head in a ‘drastically anti-investment direction’ if a planned rise in corporation tax goes ahead, telecoms giant BT warned yesterday.
The FTSE 100 company, valued at £14 billion, said the UK was heading towards a ‘cliff-edge deterioration in the tax environment for investment’.
It is the biggest corporate broadside yet against government plans to hike corporation tax from 19 per cent to 25 per cent.
Chancellor Jeremy Hunt is under increasing pressure from MPs and business leaders to abandon the plans and deliver a much-needed growth boost.
BT warned of the damaging impact the hike, together with the end of the so-called ‘super deduction’ policy which gives tax incentives for investment, would have on the country.
Telecoms giant BT, valued at £14 billion, said the UK was heading towards a ‘cliff-edge deterioration in the tax environment for investment’
Chief financial officer Simon Lowth said: ‘Productivity growth is stubbornly low – and although not just a UK problem, does mean that some of our international competitors are starting to outpace us. Business investment has also been poor; a problem because it’s one of the key ways of helping the UK to break the cycle of low growth.
‘At a time when the economic growth which business investment could unlock is urgently required, the case for intervention at the upcoming Budget has never been clearer.’ It came as a survey by the British Chambers of Commerce (BCC) found that nearly one in three businesses (30 per cent) are regularly finding themselves caught up in tax and red-tape problems.
The poll also revealed that 65 per cent will raise prices due to cost pressures, while almost half fear they will struggle to pay their energy bills when a government support package ends. And just over half are struggling to recruit staff.
Shevaun Haviland, director general of the BCC, said: ‘This snapshot of the state of play for business at the start of 2023 sets out exactly why the Chancellor must act in his Budget to fuel investment in the UK.’
The BCC is calling for childcare to be made more affordable, business rate reforms to help start-ups, and funding to help businesses to become greener and more energy efficient.
A broader coalition of business leaders and MPs is increasingly pushing for the hike in corporation tax to be binned, raising the prospect of a backbench rebellion if Mr Hunt does not act.
Many Tories are furious that the UK is heading towards having its highest tax burden since the Second World War. Households are also being squeezed as a freeze on income tax thresholds drags millions into higher tax bands.
Luke Johnson, an entrepreneur and former Channel 4 and Pizza Express chairman, said the corporation tax was ‘sending a very bad signal’ and that the Government was ‘more socialist than the Labour Party’.
Chancellor Jeremy Hunt (right) is under increasing pressure from MPs and business leaders to abandon the plans and deliver a much-needed growth boost
He said despite Mr Hunt’s background as a successful entrepreneur, the Chancellor ‘seems anti the free markets and even capitalism’. ‘This will have repercussions for companies making big investment decisions here as they’ll be unable to make returns,’ Mr Johnson added.
‘This goes against the open-for-business rhetoric. Actions speak louder than words.’ The calls for the corporation tax hike to be scrapped grew after figures this week showed a £30 billion windfall for the public finances from lower-than-expected borrowing.
Drugs giant AstraZeneca recently cited tax as the reason for choosing to build a major factory in Ireland rather than England. John Longworth, the former BCC director-general and pro-Brexit campaigner, said: ‘The Chancellor now has no excuse to raise corporation tax.’
He added: ‘Doing so would send out the wrong signal regarding investment and enterprise in the UK and would be an act of economic vandalism.’