Budget 1999: Business Reaction - A cautious welcome in the boardrooms
Wednesday 10 March 1999
But executives worried about what the Chancellor did not say, in particular his silence on two crucial problems facing industry - the high pound and the economic sluggishness of the country's key continental European trading partners.
"The Chancellor's Budget was based on an optimistic forecast for the economy going out three years," said Alan Armitage, chief economist of the Engineering Employers' Federation. "If that forecast turns out to be wrong, then everything the Chancellor said would be called into question."
Executives were surprised that the Budget was not fiscally neutral, as predicted, but contained tax cuts worth pounds 4bn. And they worried that the relative looseness of the Budget might hold back the Bank of England in its push to lower interest rates from their current 5.5 per cent level.
"The overall stance of the Chancellor was that it was a prudent give- away Budget," said Ms Lea. "If that's the case it could stop lower interest rates, and that would be bad."
Other executives noted that, despite the focus on enterprise, the Chancellor said nothing about cutting red tape. "We still have to live with the minimum wage," said Ms Lea. "We still have to live with restrictions on the working week imposed by Brussels."
Reaction was divided between big business, small and medium-sized businesses, and bodies representing the country's 4 million self-employed.
Big business was relieved at the absence of new taxes. "Large companies have had to digest tremendous structural change over the past 18 months," said David Cruickshank, London tax partner at accountants Deloitte & Touche. "They will be happy there's a breather."
Small and medium-sized businesses were most upbeat. "I'm very positive," said Mark Dixon, chief executive of Regus, the world's largest operator of business centres. "It seems the Chancellor wants to get the country into high competitive mode. It seems like he's getting the country in the right mode for the new millennium."
The Chancellor's focus on enterprise pleased Jonathan Clarke, a director of venture capital group Cinven and a spokesman for the British Venture Capital Association. "We asked for tax breaks of pounds 250,000 to facilitate moves by executives in major companies to small, high-risk start-ups," he said. "The Chancellor announced tax breaks worth pounds 100,000. Still, that's definitely a step in the right direction."
Even small businesses found much to cheer. "The reduction in the lowest band of business tax from 20 to 10 per cent on profits of less than pounds 50,000 will give a tremendous boost to small retailers, to the corner shop," said Pamela Webber, chief economist of the British Retail Consortium.
The sharpest criticism of the Budget came from representatives of the self-employed. "The Chancellor missed the target," said Ian Handford, chairman of the Federation of Small Businesses.
"The budget for the self-employed was a bit grim. Considering there are 4 million self-employed, and the sector is growing, this was a serious oversight," said Mr Handford.
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