Calls are growing for the government to offer more tax relief for companies who want to increase investment.

The Institute of Directors is the latest lobby group to ask the chancellor to increase the annual investment allowance for businesses, which offers tax relief for expenditure on plant and machinery, from £200,000 to £1 million in his autumn statement next week.

The IoD, which represents 34,000 company directors, said the relief would encourage investment at an uncertain time for businesses and give small and mid-sized companies an incentive to buy productivity-raising equipment. The same idea was put forward to the chancellor by the CBI this month. Both organisations say that members have put investment plans on hold since the Brexit vote.

Simon Walker, director general of the IoD, said: “This is a moment for the government to act decisively to make it easier for firms to expand and find more opportunities. We know that there isn’t a limitless source of funds, so we urge the chancellor to make tax changes that incentivise investment.”

The IoD also recommended that the government launch a consultation on radical tax reforms, including a replacement for corporation tax, which it claims is becoming “increasingly poorly suited to taxing global business”.

The recommendations came as a survey of the IoD’s members found that while optimism about the economy’s future had been returning over the summer, having dropped in July, this was reversed in October, when the net optimism balance dropped 20 per cent.