The Budget met with a lukewarm reception in many quarters of industry this week with complaints that many of the measures were not bold enough to give manufacturing industry the boost it requires.
Many headline measures aimed at small businesses such as tax credits for research and development spending or incentives to boost corporate venturing will not start until April 2000 or later. This has led to fears that firms may put investment projects on hold until the tax regime changes.
‘There’s a lot of tinkering, but much of it isn’t coming until next year,’ said Helen Riley, tax partner at accountants Robson Rhodes.
Manufacturers’ biggest criticism has been the lack of moves to tackle the pound’s strength. Some believe there will be less scope to drop interest rates this year following the cut in the basic rate of income tax.
Elaine Barnett, economic adviser at the Institute for Manufacturing said the 40% capital allowances for small firms was having little effect on investment, which in the engineering sector has fallen 22% over the last 12 months.
Others say that R&D tax credits could have a minimal impact on small firms.
The Engineering Employers’ Federation broadly welcomed the Budget, but warned that the Chancellor’s sums would add up only if his ‘optimistic’ growth predictions were correct.
‘The worse-case scenario is that we don’t get that growth. Then he doesn’t get the cashflow, and taxes may have to rise,’ said EEF economist Alan Armitage.
Reaction, p2; Opinion, p12