The Legatum Institute has today published its annual prosperity index, which indicates that the UK is the best country in Europe to start a business. This follows a dramatic growth in the number of businesses being created last year, setting a record of over 580,000 in 2014 when the UK’s economic growth stood at an impressive 2.8 per cent.
Since 2010, the Government has implemented a series of measures to promote the prospects of UK businesses. Schemes to promote investment in UK start-ups have broadly been a success. For example, nine out of ten investors are reported to have used either the Government’s Seed Enterprise Investment Scheme (SEIS) or the Enterprise Investment Scheme. Furthermore, measures to increase the competitiveness of UK firms have helped reduce costs for businesses. The Summer Budget announced further reductions to corporation tax – which, since 2010, will have fallen 10 percentage points to 18 per cent by 2020 – along with a further increase the annual investment allowance. The Treasury claims that firms will save £10 billion a year from these changes, helping encourage further investment in UK businesses over the coming parliament.
However, there have been a series of recent developments in both the service and manufacturing sectors that are of concern. Despite Britain’s current account deficit narrowing to a two year low at 3.6 per cent, survey data suggests that problems may lie ahead. The UK’s service sector has slowed, with the PMI falling to 53.3 from 55.6, and a recent CBI survey of SME manufacturers has found that orders are falling faster than at any time since 2013. There are also fears about the extent to which the UK recovery is being fuelled by debt, with the Office for Budget Responsibility predicting that household debt-to-income ratio is set to rise until the end of the decade.
This serves as a reminder that more policies to encourage competition and growth are needed in the Autumn Statement later this month. There are a number of areas that need tackling urgently. Latest statistics suggest that output in the construction industry has fallen by 1.3%. The Government needs to get on and simplify planning laws to boost building across the UK. Ministers also need to address major issues with the competitiveness of the UK’s manufacturing, along with ways to help establish a more business friendly environment across the country – such as the promotion of more Business Improvement Districts.
It’s good news that the UK is now viewed as the best country to start a business in Europe. But there is plenty more to do.