The next prime minister must come up with an economic plan to take Britain out of its low growth trap, business leaders have said.
The CBI has written an open letter to the candidates for the leadership of the Conservative party saying they must develop “serious, credible and bold” plans for growth in light of rampant inflation, skills shortages and supply chain disruptions.
Meanwhile, three separate reports from the Resolution Foundation, the National Audit Office and the Commons Treasury Committee, have also warned that a coherent economic strategy must be drawn up, rather than headline-grabbing pledges to cut taxes.
Tony Danker, the CBI’s director-general, said it would not take much for Britain, which is set to lag behind its G7 peers on business investment next year, to tip into a recession. “Were that to pass, it would prolong the cost of living crisis. But the UK is also caught in a longer-term trap of low growth,” he said.
Danker said higher productivity was the only sustainable way to tackle the problem.
Britain, which has struggled to keep up with other rich countries on productivity since the financial crisis, was closing its productivity gap with the G7 before Covid-19 struck, although it remained 13% below the average.
Liz Truss and Nadhim Zahawi, who are vying to become the next prime minister, have put tax cuts at the centre of their pitches, including reversing the proposed increase in corporation tax. Some have also advocated business rates reform and reducing National Insurance costs.
But businesses are sceptical. “A lot of companies would not see any benefit of corporation tax cuts as they are not making any money,” said Stephen Phipson, head of Make UK.
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