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Open for business: a 'workmanlike' Budget from George Osborne

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18 Mar 2016
Wednesday's budget from George Osborne has been described as a ‘workmanlike budget’ by Adam Marshall, Acting Director-General of the British Chambers of Commerce. Why was the Chancellor so chirpy about this year’s budget? Given the controversies surrounding the increased costs to employers last year because of the nationwide implementation of the living wage, this budget was fairly conservative (with a small c) and specifically focused on reducing costs to business with a number of surprise announcements along the way.

As of today, the UK has one of the lowest rates of corporation tax in the developed world with a rate cut from 20 per cent to 17 per cent. At 17 per cent, the perceived logic is that international businesses that would have previously considered a move to other business-friendly nations, are now likely to move here, boosting the UY economy event further. HSBC’s recent decision to stay in the UK is a strong indication of the fertile tax climate in the UK. Capital Gains Tax has also been reduced from 28 per cent to 20 per cent.

Fears have amounted in recent years within the food and drinks industry given the four per-cent rise in the past year in wine duty. A freeze on the duty on beer, cider and spirits has been welcomed across an industry where tax on the average bottle of scotch is an eye watering 76 per cent.

Business rates have been slashed to favour small business. This was not entirely unanticipated given the grumbles from small business owners for some time. Now 600,000 have been taken out of paying business rates and 250,000 will be on a reduced rate. Corporation tax largely works to the benefit of large business. To not have included a reduction in business rates for small businesses would have led to the rhetoric the Tories have rarely been able to shake; that they are the party of big businesses

The energy industry was the surprise winner. There was an extra £730 million to back renewables. The oil and gas industry has seen its supplementary taxes (on top of usual business related taxes) reduced from 20 per cent to 10 per cent in order to relieve the burden of a depressed North Sea oil industry, suffering from high costs of production and rock bottom oil prices.

Businesses can only benefit from a fuel duty freeze to combine with low fuel costs to make logistics dependent industries more profitable.  New road -widening schemes between Leeds and Manchester, the announcement of the HS3 to link the North and the plans to develop the Crossrail 2 will all have a direct effect on businesses.  The improvement of travel times across the north and south is going to have a disproportionate tangible benefit to small businesses. An example of this is reduced times and costs associated with travelling for electricians, plumbers and window-fitters travelling nationally. Richard Gregg, Manchester and North Cheshire regional chairman, Federation of Small Businesses said he was ‘delighted’ at the increased connectivity in the region.

It has not all been rosy for British businesses from an entirely economic viewpoint. There will be a sugar levy to the tune of £520million on sugary drinks, with Osborne quite easy regarding whether this be subsumed by the manufacturers or consumer. Jamie Oliver was exceptionally pleased however, having campaigned heavily to increase the cost of sugary refined products in order to reduce obesity levels in the UK. Shareholders in UK soft drink manufacturers such as Britvic have been outraged. IRN-BRU’s owner firm took a five per cent tumble immediately after the announcement, emphasising the shock of the inclusion.

The tobacco industry is also subject to a 2 per cent above inflation rise, squeezing the pockets of smokers even further, and more crucially, the industry itself. You will probably not be surprised to hear that sympathy has been short in supply for the tobacco trade. Anyone with insurance, business or otherwise, will be affected by a rate rise by 0.5 per cent. The growth forecast has also been cut from 2.4 per cent to 2 per cent for the next year which is going to be uncertain times.

All told, the budget has improved the climate for businesses to operate in during a time of great uncertainty globally. The reaction has been emphatic on a while from the business community to offset the disappointment of last year’s budget. How the UK’s economy will perform because of it is anybody’s guess. However, on the whole, it has been an excellent week for British businesses, small and large.
How do you think announcements in this week’s budget will affect you? I’d love to hear your thoughts in the comments below. For the latest industry news and expert insights, sign up for our newsletter.  Receive newsletter
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