CBI calls for business tax exemption

Government should exempt green technologies and energy efficiency investments from business tax rates in order to accelerate the net zero carbon transition, according to the UK’s biggest business group, the Confederation of British Industry.

The CBI argues that the current business rates system actually penalises firms that invest in their property, imposing an immediate higher business rates bill. Knowledge of this often discourages firms carrying out green renovations to their buildings.

As use of buildings accounts for 40 per cent of the UK’s total carbon footprint, investments in decarbonising properties should be a major priority for companies. So business rates need reforming to incentivise green building upgrades.

With the government’s fundamental review of the business rates system, concluding this spring, the CBI wants an exemption provided to green upgrade measures that improve a property’s energy efficiency.

Implementing such reforms could unleash a wave of green investment to help decarbonise the UK’s built environment, helping support the economic recovery from Covid-19 while furthering the net zero agenda, argued CBI chief economist Rain Newton-Smith.

“The upcoming review is a key chance to create a modern, sustainable new system that keeps pace with a changing economy and new technologies, “ she said. “Unlocking widespread business investment can power a UK recovery, create thousands of green jobs and boost productivity post-pandemic. “

Exempting green building upgrades and technologies from business rates would also ease pressure on businesses in the wake of the pandemic. This has drastically reduced investment in the UK by almost three times as much as the last financial crisis in 2008, according to Newton-Smith.

Business investment fell by a record 27 per cent during 2020, a much larger hit than experienced by other G7 countries.

“With companies already strapped for cash and investment, pressing go on their net-zero plans seems like an uphill struggle, “ she said. “The need for business rates reform is recognised across the board. A new rates system has the potential to power a UK green revolution and spur investment.”