Business investment: Not just one big problem

Written by former No.10 adviser Giles Wilkes, this report warns that a failure to stick to a clear direction and fulfil policy promises is very damaging to businesses whose plans are dependent on government actions. Industrial strategy has been taken up and dropped twice in the past 15 years – a terrible level of volatility when many companies plan investments that endure for decades.

Lavish, tax-focused attempts to induce new investment – such as Liz Truss’s pledge to reduce corporation tax – might prove costly and could do little to encourage business investment. Broader business conditions are far more important than the tax on any eventual profit.

Instead the next prime minister, and their chancellor, should put an end to years of confrontational government behaviour – seen most concerningly in its approach to the Northern Ireland protocol – and seek to create a predictable and stable business environment.

To achieve this, the paper recommends that the next prime minister:

• place more emphasis on ‘non-tax options’ such as labour force or infrastructure
• consider where high-level policy goals – like net zero – can align with investment like foreign direct investment (FDI) for the Global Britain agenda or R&D investment
• ensure that raising investment is not just a Treasury responsibility – this is a whole of government challenge; not a single problem but many different problems
• award longer-term budgets, particularly in areas like science and innovation where the timescales are naturally long
• create supportive, expert organisations like the Office for Life Sciences or the Office for Low Emission Vehicles to act as a guide to businesses looking to invest and as their champion within government.