Was this a bad Budget for business?

So was it a good Budget for business? The answer depends on whether you run an "old economy" or "new economy" company, and it depends on whether you are a multinational giant or just a gleam in the founder's eye. Broadly speaking, the Chancellor had good news for small young hi-tech companies and their employees but only bad tidings for the UK big employers - the multinationals.

So was it a good Budget for business? The answer depends on whether you run an "old economy" or "new economy" company, and it depends on whether you are a multinational giant or just a gleam in the founder's eye. Broadly speaking, the Chancellor had good news for small young hi-tech companies and their employees but only bad tidings for the UK big employers - the multinationals.

The one thing that is clear is that the Chancellor did not have business in his sights when he delivered his fourth Budget. While Labour's early Budgets were aimed at pleasing business, with cuts in corporation tax and incentives for entrepreneurs, Budget 2000 was aimed at Labour's core areas of support - the National Health Service, the less well-off and pensioners.

The Confederation of British Industry said rough estimates showed the Budget would leave the business sector £250m better off this year. The benefits would rise to £750m next year and £500m in 2002. But it said these calculations did not include higher stamp duty on commercial property or the climate change levy.

There are some very clear winners and losers. Ian Barlow, head of UK tax at accountants KPMG, said: "The Chancellor has done a lot for small companies but not for big companies and it these multinationals that make up much of the prosperity and employment in this country."

The main hit on multinationals was the surprise decision to close two tax loophole for businesses with operations overseas. Together they will raise £610m over the next three years, according to the Budget Red Book. "This will probably affect every company in the FTSE 100 and beyond," said Mr Barlow. "It will be a discouragement to using the UK as a base for multinationals."

One of the loopholes stops businesses setting up offshore subsidiaries in order to average out the tax impact on dividends from outfits in high and low-tax regimes. The other ends the ability of UK companies that locate subsidiaries in foreign countries from benefiting from lighter tax regimes.

Mr Barlow said this was especially harmful. "These companies are not tax avoiders. They made their decision where to locate on commercial grounds. They have made the investment and taken on people and now the rules have been changed retrospectively."

The other major hit came from the increase in stamp duty. Business had argued for an exemption for commercial property but will now face a bill of £250m over the next three years. The rest of the changes - which amount to £325m in the 2001/02 fiscal year, all involve tightening tax laws in areas such as insurance companies, rent factoring and petroleum revenue taxation.

However, business was keen to praise initiatives to encourage entrepreneurship and employee share ownership. The list of benefits, which total more than £1.5bn in the 2001/02 tax year, was headed by a new permanent 40 per cent first-year capital allowance for small- and medium-sized enterprises.

On top of that came a 100 per cent first-year allowance for investments by small enterprises in IT equipment. Businesses were alsooffered a £100 discount for filing VAT and PAYE returns by e-mail.

IT firms are also likely to benefit from a new taper on capital gains tax on employee share ownership schemes in unquoted companies to 10 per cent after just four years. New companies such as internet firms that have little cash revenue are most likely to offer shares and share options instead of salary. This will cost the Treasury £770m over three years.

Peter Wallis, a tax partner at Deloitte & Touche, said: "The four-year period is a boost for investors in growing businesses in today's e-business age where companies go to market earlier."

Robin Saxby, the chief executive of the FTSE 100 software group ARM Holdings, said the package was "encouraging". "They are trying to do the right thing. They have the vision but the detail can trip you up. Let's hope that won't happen here."

But John Downing, co-founder of First Tuesday, an e-entrepreneurs network, said he was disappointed the Chancellor had failed to settle the crucial issue of National Insurance contributions on unapproved share schemes. Currently these accrue notional NI payments that fall due to the employer when the options are exercised. The Chancellor has launched a consultation but businesses were disappointed that the only alternative offered is transferring the cost to the employee.

The CBI's chief economic adviser, Kate Barker, said that all the new taxes, reliefs and incentives should be taken in the context of the £5bn extra tax burden she said the Chancellor had put on to businesses since May 1997. "We keep saying it until it gets boring but it is important," she said.