Growing business unease over prospect of a hung parliament

Nearly two thirds of businesses (65%) are “concerned” or “very concerned” about the potential impact of a hung parliament, according to the British Chambers of Commerce’s latest Monthly Business Survey.

The results add to growing unease about the prospect of a hung parliament and what it might mean for decision-making. The results follow concerns expressed by leading investment funds last week, who believe the lack of a clear mandate to govern could affect decisive action being taken to cut the UK’s huge budget deficit.

Of the 300 companies polled by the BCC, 22% were “not concerned” and 13% thought the failure to secure a working parliamentary majority at the General Election would be “a good thing”.

Also asked which form of taxation was most likely to rise after the election, leaving aside the planned increase in National Insurance in 2011, companies overwhelmingly said VAT would be increased (54% responded VAT, 13% excise duties, and 12% income tax). This suggests that companies are already factoring in a VAT rise in their financial planning.

In the BCC’s February survey, businesses said an increase in National Insurance would be the most damaging tax rise for the Government to impose on them - just 6% felt that a NICs rise would be the least damaging option, compared to 36% for VAT.

Taken collectively, the BCC argues these results provide further evidence that scrapping the planned employer NICs hike – a tax on jobs – and replacing it with a 1% VAT rise would be less damaging to firms, most of which expect VAT to increase after the election anyway.

Commenting, David Frost, Director General of the British Chambers of Commerce (BCC) said:

“Businesses are right to be wary about the prospect of a hung parliament. Instinctively, companies prefer a clear mandate to lead and govern. With our economy still fragile and the public finances in a dire state, the overwhelming concern is whether a hung parliament will provide decisive action around the UK’s unsustainable deficit.

“Whatever the outcome of the election, whether we have a coalition government or not, we must see a credible plan to reduce the deficit and restore confidence within ninety-days.”

Talking about National Insurance and VAT, Mr Frost added: “These results provide further evidence that the employer National Insurance rise, planned for 2011, should be abolished in full. Most businesses expect VAT to increase after an election to help plug the hole in our public finances. Considering companies have already said that VAT would be less damaging to their operation than a hike in NICs, it seems obvious that the tax on jobs should be scrapped and replaced by a less harmful tax on consumption.”

Ends

Media Contact:

Sam Turvey
Tel: 020 7654 5813
Email: s.turvey@britishchambers.org.uk

Notes to Editors:

April Monthly Business Survey results:

Q: How concerned are you about the potential impact of a Hung Parliament on your business?

30.4% stated that they were “very concerned”
34.8% stated that they were “concerned”
21.8% stated that they were “not concerned”
13.0% stated that they thought a hung parliament was a “good thing”

Q: Aside from planned increases, which one of the following taxes do you think is most likely to increase after a General Election?

54.1% responded VAT
12.2% responded Income Tax
5.4% responded Corporation Tax
3.7% responded Capital Gains Tax
13.2% responded Excise Duties
1.0% responded Inheritance Tax
1.4% responded Air Passenger Duty
3.7% responded Vehicle Excise Duty
5.3% responded “No Tax Rise” (other than planned)

Q: What single measure in the Budget do you think will be the most beneficial to your business?

20.2% responded the doubling of the Annual Investment Allowance
12.8% responded the doubling of Entrepreneur’s Relief
22.1% responded more open procurement
31.4% responded with the extension of Small Business Rate Relief
7.0% responded the creation of a small business credit adjudicator
6.5% responded the creation of a new Green Investment Bank

February’s Monthly Business Survey result on the impact of specific tax rises:

Q: Taxes are likely to have to rise to reduce the UK's budget deficit. Which one of the following tax increases would be least damaging to your business?

VAT Increase – 36.2%
NIC Increase – 6.6%
Corporation Tax Increase – 12.5%
Capital Gains Tax Increase – 30.0%
Fuel Duty Increase – 14.7%

1. Ten leading investment funds were surveyed about the prospect of a hung parliament by the Financial Times (19-04-10)

2. Ahead of the General Election, the BCC will publish a ninety-day plan for business growth.

 
The British Chambers of Commerce (BCC) is the National Voice of Local Business.
The BCC sits at the heart of a powerful nationwide network of Accredited Chambers of Commerce serving business across the UK, which employ over five million people