There was also disappointment that the Chancellor failed to give more details on key elements of the Government's tax and welfare policies, including changes to capital gains tax and the introduction of individual savings accounts.
The Confederation of British Industry warmly welcomed the decision to abolish advance corporation tax (ACT), but warned that it would strongly oppose the cost to business of the move to paying corporation tax bills "on account" quarterly. The Inland Revenue said the four-year transition period for companies from 1999 would benefit the Exchequer by pounds 7.7bn.
Adair Turner, director-general of the CBI, said: "The figures set out ... suggest a negative impact on corporate cash flow for the initial four years. We will argue strongly for changes to ensure this does not occur."
Kate Barker, the CBI's chief economist, added that the transition could result in a "big hit" for the corporate sector. "The system will create winners and losers. This really is jam tomorrow." Responding to the attacks, Treasury sources said last night that the transition period was "up for discussion".
City experts were also quick to highlight the impact of the tax changes on business. Richard Kersely, equity strategist at BZW, said: "Cutting corporation tax and ACT is headline grabbing, but the Exchequer wins. This will not be terribly helpful to many companies."
BAT, the tobacco and financial services giant, claimed it would be a major beneficiary from the abolition of ACT, given its plans to demerge its financial services and tobacco businesses. David Allvey, finance director and chairman of the tax committee of the 100 Group, said: "It's obviously a great help to the prospects of a standalone tobacco company which will make most of its money outside the UK. It's an encouraging sign that the Government is ... interested in genuine consultation."
The Institute of Directors was more positive about the the tax changes, pointing to the 1 per cent cut in the rate of corporation tax as "excellent" news. Richard Baron, taxation executive at the IoD, said the move to quarterly corporation tax payments was "inevitable". But he added that the abolition of ACT was "wonderful" for companies.
Companies were also disappointed at what they said was a shortage of concrete proposals in the Green Budget, which some described as "dull". Christopher Haskins, chairman of Northern Foods, said: "It looks like pretty predictable stuff. He's got plenty to think about but, as a lot of people expected, he's not revealing his hand."
The City found few surprises in the Green Budget. Bob Semple, equity strategist at NatWest Markets, said: "The whole thing is a damp squib. I think the analysts will welcome it because they can go home early."
Richard Iley, strategist at ABN Amro Hoare Govett, agreed. He said: "This Budget is disappointing for gilts as the reduction in PSBR were not as large as expected in this financial year and next. The Chancellor has also highlighted the fact that rising wages could be a potential banana skin."
The Chancellor's rebuke to companies on the dangers of spiralling wage inflation drew sharp criticism from businesses which claimed they were forced to pay higher salaries in competitive industries. Siemens, the United Kingdom arm of the German industrial giant which has invested billions in Britain over the past five years, doubted whether the call would have much effect.
"There's a finite pool of people and the labour market is a free market. The more that companies start up computer chip plants in the UK the more managers' salaries will go up as it becomes harder to find the right people."
Ms Barker said companies recognised the inflationary potential highlighted by Mr Brown. But she continued: "The mechanism to restrain pay will be the difficult competitive position for manufacturers."
Norman Rose, head of the Business Services Association, argued that the call for pay restraint was necessary. "The issue is really a moral one. He's saying bosses in industry must not be seen to be taking unduly large increases."
The Engineering Employers Federation said it welcomed the general sentiment of the Chancellor's announcement on training and skill shortages and macroeconomic stability. But a spokesman questioned Mr Brown's argument that the strong pound was preferable to a damaging short-term boom. "We remain very concerned about the effects of a strong pound. Export order books are at their lowest level for three years."
Mr Rose said Mr Brown's statement showed new Labour had not reneged on its promises to business. "This says that Labour are much more a party of social democracy, with a fair balance between individuals and companies."Reuse content