27 November 2019, UK’s biggest listed firms generate £85bn in tax despite slowing economy
● 100 Group firms generate nearly 12% of total UK Government tax receipts in 2018/19
● All the taxes paid by companies equivalent to more than 40% of their commercial profits
● Capital investment increases to £26.8bn – up nearly 10% on last year
● Firms employ two million people in the UK
The total tax contribution of the UK’s largest listed companies has been sustained this year despite weak economic growth and a drop in overall profitability. Research shows that 100 Group companies generated an estimated total of £84.7bn in 2018/19, just under 12% of all total government tax receipts.
Total taxes borne, such as corporation tax and business rates, which come at a direct cost to a company, stood at £26bn for the financial year. A further £58.7bn in tax is collected by the firms.
The PwC study shows that the Government remains the largest beneficiary of the value distributed by 100 Group companies, receiving 47.7% in taxes while 30.1% goes to employees in the form of wages and salaries. The firms employ two million people in the UK.
The study also highlights the companies’ wider economic contribution. Despite falling business investment in the UK economy overall, capital investment by the 100 Group companies has reached £26.8bn, an increase of 9.6% on the previous 12 months. Since 2012, capital investment has averaged 15% of total annual UK business investment. A total of £9.3bn was invested in research and development, 2% down on last year.
The 15th Total Tax Contribution of the 100 Group study shows the total tax burden of 100 Group companies has gone above 40% as a proportion of their commercial profits. This reflects a shift in tax policy from taxes on profits to taxes on employment and property, which have been sustained or increased as profits have fallen. These taxes include employer national insurance contributions, which was the largest tax borne for the companies, accounting for 27%. Corporation tax was the second largest tax borne (24.3%) followed by business rates (19.1%) and irrecoverable VAT (15%). For every £1 paid in corporation tax, £3.05 is paid in other taxes borne.
100 Group companies employ an estimated two million people – 6.1% of the total UK workforce, the study shows. Employees at the companies are paid an average of £37,167, which is 22% higher than the average national wage, resulting in average employment taxes of £13,492 per employee.
The total tax contribution of the 100 Group has been relatively stable since recovering from the economic crisis. The report demonstrates how the profile of taxes borne has changed, however, with business taxes other than corporation tax now accounting for nearly 76% of total taxes borne compared to 50% in the first year of the study.
Brian Gilvary, chairman of the 100 Group, said:
“Against a backdrop of increasing geopolitical and economic uncertainty this report clearly demonstrates the value and importance of the UK’s largest businesses. The figures show that the UK remains a prime location for investment, innovation and highly skilled employment. There are clear challenges ahead. It will be critical that the UK adapts to ensure it maintains its position as an attractive and competitive place to do business on the global stage.
“The 100 Group believes business has an important part to play. We are committed to engaging with the Government and other stakeholders to realise an environment that attracts long-term investment, drives ground-breaking innovation and provides inspiring employment opportunities.”
Chris O’Shea, chairman of the 100 Group Tax Committee, said:
“We are proud that the member companies of the 100 Group continue to make a significant and sustained contribution to the UK economy despite it slowing, with total tax contributions to the UK Government of £85bn in the past year and an increase in the total tax rate to over 40%.
“The report additionally highlights the broader benefit the FTSE 100 brings to UK society; we employ two million people in the UK with an average salary that is more than 20% higher than the national average and in the past year increased our capital investment by 10% to £27bn, with a further £9bn invested in research and development. On top of this, each company supported nearly 6,000 UK suppliers, with an average gross value add per employee of £75,485, almost 30% higher than the average employee in the UK economy as a whole.
“The report’s findings demonstrate the pivotal position large companies have in driving the UK economy and the significant change in the landscape of UK taxes since the total tax contribution report was first published. As part of this, it is important that the UK’s largest companies continue to pay their fair share of tax and we hope that this report will help bring transparency to the current debate.”