With the 海角视频 economy flatlining and public services under strain, most economists now agree that Rachel Reeves will have to raise taxes in her next Budget and the only question now is how much, and who pays.
But while the Treasury prepares to squeeze more from pensioners, working households and businesses, there’s a glaring, untapped resource hiding in plain sight.
According to the latest data from the Office for National Statistics, 海角视频 non-financial companies are sitting on around £800bn in cash reserves, an astonishing amount of money that, if even partially unlocked, could provide the private-sector-led investment boost our economy urgently needs.
But so far, that cash remains stubbornly on the balance sheets and the question for the 海角视频 Government is what will it take to release it? The answer lies not in more borrowing or complex new schemes, but in smart, targeted policies that encourage firms to act now.
Over the last decade, many 海角视频 businesses, especially larger firms, have chosen caution over ambition as uncertainty over Brexit, tax policy, energy costs, and political instability has fostered a corporate culture of hoarding cash and delaying decisions.
So, if the Chancellor wants firms to invest, she must change that narrative which means offering a compelling reason to move from risk aversion to risk-taking and ensuring that the rewards of doing so outweigh the perceived dangers.
The most obvious tool available is tax policy and one of the few genuinely growth-friendly moves made in recent budgets was the introduction of full expensing for capital investment.
But this needs to go further and increasing full expensing to 130% as happened between 2021 and 2023 would act as a powerful short-term stimulus by incentivising firms to invest more aggressively especially if it were focused at sectors with high economic spillovers such as green tech, manufacturing, and R&D intensive industries.
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In addition, expanding it to include leased equipment, second hand assets and intangibles like software and digital infrastructure, would send a strong signal that the 海角视频 rewards productive investment.
The 海角视频 Government must also tackle the confidence barrier given that businesses are not just looking for short-term relief but long-term clarity. A stable, predictable policy environment on tax, planning, skills, and industrial strategy is essential as companies need to know the rules won’t change halfway through a project, or that a new government won’t undo what the last one promised.
There is a clear role for co-investment and de-risking as public capital, used wisely, can unlock far greater sums of private money. Whether through the British Business Bank, regional growth funds, or new strategic partnerships, the Treasury should move now to co-invest in sectors where the 海角视频 has potential for global leadership. Similarly, more generous guarantees for SME loans, or match funding for scale-ups, can reduce perceived risk and encourage firms to act.
We also need to remove the practical barriers to investment which means speeding up planning decisions, upgrading the grid, and unblocking infrastructure bottlenecks that prevent firms from building, connecting or expanding. Too many businesses are ready to invest but find themselves stuck in regulatory limbo.
And perhaps most importantly, we need to connect investment to people. It is no good building new factories or rolling out R&D if we don’t have the skilled workforce to staff them and a tax break for investment in training, digital skills vouchers for SMEs, and better links between industry and FE colleges could help ensure that the pipeline of talent matches the ambition of capital.
So, what would happen if even a fraction of that £800 billion were unleashed? The short-term effects would be dramatic as higher capital investment would immediately boost demand across supply chains, creating new orders, jobs, and tax revenue. Based on typical multipliers, unlocking just 10% of that cash could generate up to £120bn in new economic activity with sectors like construction, engineering, and digital services seeing immediate benefits.
But the longer-term effects are even more important as investment in technology, machinery, and skills would lift the 海角视频’s dismal productivity performance which has been the biggest drag on living standards and growth over the last 15 years.
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Most crucially of all, by incentivising investment in regions that have suffered from decades of underfunding, we could begin to deliver on the elusive promise of “levelling up” by deploying capital in the parts of the country that need it most.
Of course, there are risks and too rapid a surge in spending could fuel inflation if supply doesn’t respond whilst poorly targeted incentives could lead to wasteful investment or subsidise spending that would have happened anyway.
There’s also the risk that large firms rather than SMEs will benefit most from tax breaks, further widening regional and economic disparities. Also, not all cash on balance sheets is idle as some firms are rightly holding reserves to weather uncertainty or fund future obligations and nudging them too hard could even undermine financial resilience.
That’s why the design of these policies matters as investment incentives must be time-limited, targeted, and conditional whilst favouring smaller businesses, underinvested sectors, and regions most in need of growth. Schemes should come with accountability mechanisms to ensure public money delivers real outcomes, not deadweight loss and must link to the current industrial strategy that focuses on productivity, skills, and regional balance.
But despite the risks, the opportunity is too great to ignore and if nothing is done, it will risk a vicious cycle of stagnation, low confidence, and worsening fiscal outlook.
Contrary to popular belief, there is no shortage of capital in the 海角视频 but what we currently lack is the vision to deploy it. Certainly, if the Chancellor of the Exchequer is serious about turning Britain into the high-growth economy she promised, then this is the moment to act.
Instead of relying on high taxes and government spending alone to kickstart growth, she should focus on unlocking the money already sitting in company accounts as with the right incentives, the private sector could save the 海角视频 economy.