Businesses raise investment fears

Businesses are set to put the brake on investment over the next 12 months held back by changes to Government tax allowances.

Research from accountancy body the ICAEW said every sector expects to slow their investment growth except business services compared with their intentions in 2014.
Transport and storage expects growth of 1.6 per cent, down from plus 3.8 per cent last year, property up 2.5 per cent, down from 3.7 per cent, construction up 0.7 per cent compared with 3.6 per cent, manufacturing up 1.5 per cent compared with 3.5 per cent, retail up 1.9 per cent down from 3.4 per cent, banking, finance and insurance up 1.7 per cent, down from 3.2 per cent, and IT and communications up 1.9 per cent, down from 2.3 per cent.

Business Services sees the only prospective increase up 2.1 per cent from 1.9 per cent.

However the ICAEW said there was not too much cause for concern adding that businesses have for the last year predicted less than they actually invested. This suggests that companies have been prone to “making snap decisions about when to invest”.

In the third quarter of 2013 businesses said capital investment would grow by 1.6 per cent over the next year – it instead rose by 3.3 per cent. In the second quarter of 2014 they expected growth of 2.3 per cent, but a year later investment growth was reported as 2.9 per cent.

“The research demonstrates that businesses are more conservative when it comes to their medium-term investment plans. Over the last two years this has been no surprise – we’ve had the uncertainty of a General Election, and the problems with the eurozone. However companies are dynamic and are clearly making the most of any short-term opportunities that arise,” said Stephen Ibbotson, ICAEW director of business. 

“The government has made productivity growth a key part of the economy, and it is contingent on turbo-charging our spending on plant and machinery, and upskilling our workforce. However at the last Budget the government set the Annual Investment Allowance at just £200,000, far lower than businesses have been used to. The government needs to ensure that our fast-growing firms can expand and drive the economy forward. Increasing the Allowance, and providing export tax credits would be a good start.”

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