British business investment is the lowest in the G7. We now invest just 16 % of GDP compared to 20 % across the EU and 24 % in the United States. The result? Ageing vans, outdated machinery, creaking IT systems, and a productivity gap that has cost the UK £100 billion in lost output since 2016.
Small and medium firms are hit hardest. When the 2019 super-deduction ended, capital allowances reverted to a miserly 18 % writing-down rate for plant and machinery. A £50,000 investment 
now gives a tax break spread over decades instead of instantly. No wonder vans stay on the road past 200,000 miles and factory owners patch machines instead of replacing them.
Bring back 100 % first-year capital allowances on all plant, machinery, vehicles, and IT equipment, and the impact would be immediate. The OBR estimates that every £1 billion of extra investment triggered by full expensing adds £2.40 to the economy within five years. A permanent 100 % allowance could unleash £20 billion of new SME investment in the next three years alone.
This isn’t a subsidy; it’s simple tax logic. Businesses only claim the relief when they actually spend the money. The Treasury gets the VAT upfront and higher corporation tax later when profits rise. Every major economy offers something similar: the US has bonus depreciation, Germany has generous degressive allowances. Britain used to lead the world on this. We can again.
Corporates already lobby for special deals. SMEs get crumbs. A blanket 100 % allowance levels the field without bureaucracy. A builder in Leeds could replace his fleet. A manufacturer in Glasgow could automate. A tech start-up in Bristol could finally buy the servers it needs.
Investment is the oxygen of growth. Right now, Britain’s small businesses are gasping.
The 1832 Club is fighting for these changes. The more members we have, the louder our voice in Westminster.
Join today from just £5/month or £40/year and help to support pro-SME candidates.
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