Last night, President Obama delivered his annual State of the Union address in which he outlined some of the measures required in order for the US to reform and grow its economy.
His remarks on tax, small businesses and innovation in particular however, raise some important lessons for the UK’s ability to compete globally – both now and in the future.
“…Let’s work together to close those loopholes, end those incentives to ship jobs overseas, and lower tax rates for businesses that create jobs here at home.”
The UK must also seek to remain competitive against measures taken by other nations, and incentivise our manufacturing businesses in the tax system. As the ADS’ 2014 budget submission suggests, further reform of capital allowances, an increase R&D tax credits limits and a re-introduction of the industrial buildings allowance will help to ensure that companies see the UK as a good place to invest.
“…Let’s do more to help the entrepreneurs and small business owners who create most new jobs in America. Over the past five years, my administration has made more loans to small business owners than any other…“
According to the HoC Public Accounts Committee, net lending by banks participating in the UK Funding for Lending scheme has declined by £2.3bn since the scheme was launched – and the number and value of loans backed by the Enterprise Finance Guarantee fell each year between 2010 and 2013. In order to successfully rebalance the UK economy, with a greater focus on manufacturing industries and increasing exports, ensuring these access points are improved so that companies can invest in new equipment and create more training & new jobs, is vital.
“We know that the nation that goes all-in on innovation today will own the global economy tomorrow….Congress should undo the damage done by last year’s cuts to basic research…”
Obama’s insistence on innovation acting as a key differentiator for future economic growth is message which is becoming much stronger here in the UK. Where emerging economies can sometimes compete on labour and raw material costs, the UK must allow high technology manufacturing and engineering industries to increase their investment in R&D. Joint industry and government support is instrumental to unlocking innovation, and will ensure that UK does not find itself in the President’s position – lamenting the future impact of cuts to research funding.