That, at least, seemed to be the point of Zahawi’s many references to the tax in his interviews on the first day. “I know that councils around the world, when they make investment decisions, are looking at the long term and the only tax they can compare globally is corporation tax,” he told Sky News. Well, yes, it is true that comparisons are easy when one is only looking at a number. The point of Rishi Sunak’s approach, however, was that it was based on an analysis that the business tax game is more complicated if the aim is to boost investment from companies, where the UK’s performance has been terrible since 2016. “It is not clear that the cut in the basic corporate tax rate has led to a step change in business investment. We need our future tax policy to be targeted and strategic,” Sunak said in a speech in March – effectively the only speech in his Covid-hit chancellorship to attempt to outline a long-term economic plan for the UK. As such, a major thrust of the Treasury’s thinking on business taxes, until now, has been how to design a successor to the “super deductions” — essentially big tax breaks on spending on equipment — that Sunak introduced as an emergency measure. for two years. spring budget 2021. The CBI, for one, wants the deductions to be made permanent, seeing them as the surest way to lift the UK off the bottom of the G7 table for business investment. The data on the effectiveness of the rebates is mixed, it should be said: so far there has been little sign of a meaningful recovery in business investment. But if there is anything close to a consensus in the boardrooms of the FTSE 100, it is that Sunak had at least identified the right problem: the UK’s yawning productivity gap against European peers, particularly France and Germany. A key question for Zahawi, then, is whether the “super-rebate” plan would survive the scrapping of the corporate tax hike. Given the state of public finances, it would be difficult to have both. A rate rise to 25% was expected to raise an extra £17bn a year, of which perhaps £11bn would be returned through investment incentives. If you’re parting with £17 billion, your room for specific pro-investment gifts is very limited. Subscribe to the Business Today daily email or follow Guardian Business on Twitter @BusinessDesk Zahawi emphasized that he was merely in “review” mode, but the allusion to corporate tax was heavy. Business leaders are ready to cheer a cut – or a freeze in this case – but, if the new chancellor goes that route, their second question may be about how a low nominal interest rate is supposed to boost business investments. Sunak looked for the clues and couldn’t find them.
AO World does the necessary cleaning
Welcome to the 90% club, AO World. Or, at the very least, honorary membership in the group of companies whose share prices have collapsed nine-tenths from their peak. AO’s high, seen as recently as January 2021, was 429p. Now the online fridge and freezer retailer is printing shares at 43p, which is almost 90% lower than it makes any difference. John Roberts, founder and chief executive, called the £40m fundraising “a sensible piece of financial management given the near-term macroeconomic uncertainty”, a cool way to describe a call for cash needed because the balance sheet is stretched and last year’s optimism has been punctured. Investors who rallied to the top – when Roberts declared that the pandemic had permanently improved AO’s outlook and pan-European expansion was poised to take off – may not be amused. AO abandoned its seven-year experiment in Germany last month and pledged to focus solely on the UK again. This makes sense as the UK operation is well established with a strong reputation for customer service. But Roberts could help himself by reining in his instinctive optimism. As recently as Monday, the company, in response to a Sunday Times report about a credit insurer reducing supplier cover, said its liquidity position had not changed since April. Two days later, it tapped investors in a fundraising that expands the number of shares on issue by 20%. This is more than a modest piece of housekeeping.
