Partner Article

Budget stirs mixed industry response

As the dust settles on this afternoon’s Budget speech, opinion from business has been mixed.

Michael Izza, Chief Executive of ICAEW, remained hesitant, despite acknowledging the Budget would show the UK is “open for business.“

He said: “However, it will have little immediate impact in accelerating the UK’s slow economic recovery. It is a budget for tomorrow, not for today. Ultimately, businesses still need confidence to invest in the UK’s economic future.”

“The tax simplification measures the Chancellor outlined are not the root and branch reform of the tax system that we believe is long overdue.

“Whilst the smallest businesses may benefit from a simpler corporation tax regime, the vast majority of individuals and companies will still have to struggle with a tax code that is already one of the most complex in the world and which continues to grow in complexity.

“Whilst offering young people grants to start their own businesses, we need to ensure they have the skills and financial acumen to make the most of such an opportunity.

“We need to ensure there is appropriate support and guidance available so they have every chance of success.”

John Cridland, CBI Director-General, said: “Family budgets have been under great pressure, and by putting more money in the pockets of ordinary people, the Chancellor has provided a much-needed confidence boost.

“The Chancellor has also painted a clearer vision of how the UK will earn its living in the future and, by seizing the opportunity to make sure our corporate tax system is more internationally competitive, he has sent a powerful signal to companies to invest, do business and create jobs in the UK.

“An extra one per cent off corporation tax this year could make a big difference to investment intentions. Plans to reduce the top rate of tax to 45p by April 2013 will show our top and aspiring talent that this Government wants them to create wealth here.

“With many calls on the Chancellor to spend money he didn’t have, the best news for businesses is that he stuck to his guns and delivered a fiscally neutral programme.

“If businesses were looking for more, it was in the area of deregulation. For smaller businesses, things may not feel very different on the ground.

“It would have also have been a huge relief if the Chancellor had taken the opportunity to get rid of the currently unworkable Carbon Reduction Commitment.”

Several measures on taxation, making steps towards system conducive to small business success, were welcomed by Phil Orford, chief executive of the Forum of Private Business.

He said: “The overall verdict is that there have been some tentative steps in the right direction, and perhaps the beginnings of a road map for the future – but for the next year or two, when many of these policies kick in - what small businesses and the economy need are confident strides forward now. Largely, that has not happened in this Budget.

“We saw nothing on reducing the mounting burden of business rates or fuel duty via cuts and a real stabiliser to regulate prices at the pump.

“These were omissions – and while the Government is working to improve access to funding and bring down banks lending costs by implementing ‘credit easing’ the National Loan Guarantee Scheme, there are concerns that the smallest firms in most need of affordable finance will miss out.

“Further, we called for tax incentives to pave the way for alternative lenders to compete more effectively in finance markets dominated by the big banks, but there was nothing on this in the Budget.

“Reducing the top income tax rate to stimulate entrepreneurship and continuing to cut corporation tax are much-needed measures and we also welcome the concept of merging income tax and National Insurance as a first step in what looks to be long overdue reforms to the tax system for small firms, but the Chancellor could have gone further to give businesses and the economy a bigger boost.”

Richard Driver, analyst at Caxton FX, said: “As expected the Chancellor reiterated the UK government’s “unwavering commitment“ to reducing the country’s public debt and he’s quite right, the UK’s triple-A rating and low borrowing costs are absolutely essential.

“Importantly, the budget is “fiscally neutral,” so it is a case of staying on course rather than ramping up austerity and the OBR’s upward revision to its 2012 UK growth forecast is supportive of this. The five-year plan to eliminate the budget deficit remains realistic.

“As ever, the key risks to the UK economy come in the form of the eurozone debt crisis and recession, as well as high oil prices. The OBR downgraded its eurozone growth forecasts, which is in line with our projections for a long and painful eurozone recession.

“All in all, it was a budget with few real surprises. Sterling hasn’t responded and the markets are firmly in wait and see mode with regard to the UK economy.”

Simon Walker, director general of the Institute of Directors thought Mr Osborne’s business offerings did not go far enough to encourage growth.

He commented: “While any tax reduction is welcome, the Chancellor has not done enough to free business from the burdens and barriers that are holding economic growth back.

“Businesses dearly want the opportunity to invest, create and build, but George Osborne must go much further if he wants to fire up the engines of the economy.

“There was a bold move on Corporation Tax, but in the bigger picture this is still not far enough or fast enough.”

Speaking from a regional standpoint, Labour MP for Bishop Auckland, Helen Goodman, also commented: “Today’s budget displays breathtaking callousness from the Tory led government by implementing tax cuts for the wealthy and pay cuts for workers in some of the most deprived areas of the UK.

“George Osbourne’s decision to cut the 50p tax rate, for people who earn £150,000 or more, shows how out of touch the chancellor is from the average family.

“As if this weren’t bad enough the Tory led coalition has rubbed salt into the wound by introducing regional public sector pay.

“Public sector wages play a vital role in the North East economy. Localising public sector pay will deepen social inequalities in the North East in comparison with other part of the UK.

“The region has over 300,000 public sector workers, figures from the TUC estimate that the local economy will lose £500m a year.

“These cuts are being made despite the fact the North East has lowest wages and the highest rate of unemployment in England.

“This decision will also hit the private sector by reducing consumer spending power depriving local shops and small businesses.

“Cutting public sector wages will not stimulate private sector growth, because there isn’t a shortage of workers – we have 10.6% unemployment in our region. Ministers clearly don’t know what’s going on.”

One of the measures not included in the speech is the launch of DEFRA’s Rural Growth Hub pilots, one of which will be located in Cumbria.

Rob Johnston, chief executive of Cumbria Chamber of Commerce, said: “This will bring millions of pounds of funding into the county and provide a real boost to rural businesses and to our economy.“

But added: “As with last year a number of the moves are still subject to consultation or involve review, such as Heseltine’s review of how Government departments can encourage private sector growth. This gives us
a concern as to what the final measures will be.”

This was posted in Bdaily's Members' News section by Tom Keighley .