Grant Thornton: Mid-sized firms seek infrastructure improvements and R&D incentives in upcoming budget

The firm’s latest Business Outlook Tracker, which surveyed 600 mid-sized businesses in early February, finds that the policy areas the mid-market would most like prioritised by government are:

• Greater access to/investment in skills and training.
• Improvements to infrastructure.
• Incentives for employers to invest in R&D.

Supporting skills development also topped the mid-market’s tax policy priorities, with ‘tax incentives for employers to invest in skills’ ranking number one, alongside ‘incentives for green investment’. This was jointly followed by ‘simplification of the UK business tax system’, ‘corporate tax cuts for UK businesses’ and ‘tax incentives for employers to invest in R&D’.

This focus on skills comes as the competition for talent remains fierce in the market and ‘attracting and retaining people’ poses the biggest challenge to mid-sized businesses over the next six months. The research finds that almost three quarters of respondents are facing a shortage in operational (72%), financial (69%) and managerial (69%) roles.

After attracting and retaining people, the next biggest challenges facing the mid-market are ‘meeting changing customer expectations’ and ‘prioritising sustainability’.

The type of government funded support that mid-sized businesses would find most useful to help address these challenges are:

• Grants to support investment in innovation and creating new products and services.
• Leadership and management training.
• Access to advice and support focused on growth.

Jill Hay, tax partner for Grant Thornton in Scotland, said: “Skills has come out as a top priority for businesses across our latest survey, as the market continues to compete for talent. But as businesses can, generally, already deduct 100% of staff training and development costs against their taxable profit, and we’re not expecting the government to go further and introduce a super deduction, it’s unlikely that we will see significant changes in this area.

“This Spring Budget is also expected to be a quieter affair with regards to R&D, after last year’s Autumn Statement confirmed the government’s wide-reaching review – which has been ongoing since 2021 – has now concluded. And while tax incentives for green investment would help to reduce costs for businesses investing in energy efficient and low or zero carbon technology, as part of their environmental strategies, the chances of green tax incentives is looking slim.

“The Chancellor kicked off 2024 signalling his desire to cut taxes further, observing at Davos the benefits that low-tax economics bring to growth and the creation of dynamic economies. Whether he can deliver on this ambition will hinge on the final OBR economic and fiscal forecast. As this is anticipated to be the last major fiscal event ahead of the General Election, any announcements are expected to be focused on closing the gap in the polls, with business tax cuts coming in second, behind those to reduce the tax burden for individuals. But our research shows that businesses are clear on what support they want to see from government, so we hope to see their needs addressed in some form in next week’s announcement.”