Recent Release | 10 Mar 2023
The case for a permanent investment deduction
Scenarios & Macroeconomic Modelling
Oxford Economics
This report is CBI‘s business case for a successor to the super-deduction regime. It investigates policy options the UK can deploy to maintain its global tax competitiveness and avoid a drop in business investment.
Background to the research:
- Investment incentives are set to fall in the UK. In April 2023, the Corporation Tax rate is set to increase from 19% to 25% at the same time as the end of the super-deduction regime.
- Before the super-deduction was introduced the UK ranked 30th out of 37 countries in the OECD for capital allowances and it could return there once the super-deduction ends.
CBI analysis, conducted in collaboration with Oxford Economics, shows that a permanent investment deduction (100% full expensing) could unlock:
- A 21% (£52.8bn) increase in the level of business investment per year by 2030/31.
- An increase in the level of GDP by 2.0% (£53.1bn) by 2030/31.
- While there is an upfront cost, the long-run net balance sheet impact is positive for Government.
The experts behind the research
Felicity and Daniel, members of the Scenarios and Macro Modelling team, are world leaders in quantitative economic analysis, working with clients around the globe and across sectors to build models, forecast markets and evaluate interventions using state-of-the art techniques.
Felicity Hannon
Associate Director, Climate Scenarios & Macroeconomic Modelling
Daniel Moseley
Lead Economist, Scenarios and Macro Modelling
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