Business cheered the Chancellor’s Autumn Statement but bankers warned that the third raise to the banking levy in 18 months could reduce the supply of credit.
A surprise cut in corporation tax, with an extra penny coming off in 2014 to take the headline rate to 21 per cent, was hailed, as were measures to boost infrastructure and plans to accelerate tax relief for capital investment.
The corporation tax cut paves the way for it to hit the Government’s 20 per cent target by the end of the Parliament. The UK already charges one of the lowest rates in the G20 group of the world’s biggest economies.
George Osborne, the Chancellor, described it as “an advert for our own country which says come here, invest here and create jobs because Britain is open for business”. He was backed by the manufacturers’ trade body, which said the Statement “pulls levers of growth in the right direction”.
Terry Scuoler, chief executive of the Engineering Employers Federation, highlighted “measures on the annual investment allowance, the headline rate of corporation tax, export support and infrastructure spending”. He said they “have laid the foundations of a strategy to ensure business chooses to invest and grow in the UK”. The Institute of Directors described the Statement as “a tricky job well done”. Graham Leach, chief economist, said: “Faced with a weaker outlook for GDP growth, the Chancellor needed to raise business confidence while at the same time keeping the deficit on a downward path. And he largely succeeded.”
However, Mr Leach said the IoD’s “key concern” remained the budget deficit describing growth forecasts from the Office for Budget Responsibility as overly optimistic. The CBI took a more cautious tone, saying that the Government has to ensure its plans to boost business delivered on the ground.
John Cridland, director-general, said: “The CBI has been crying out for real action on infrastructure, investment and exports; £5bn on near-term infrastructure like the Tube to Battersea, half a billion a year tax relief for small firms and £1.5bn extra export support should boost investment and create jobs. The Government now has everything to prove by delivering.”
Numis, the broker specialising in small and medium-sized listed companies, said help was needed to stimulate investment. Chief executive Oliver Hemsley said: “We are disappointed that there are not more measures to stimulate investment in UK small and mid-cap companies, the growth engines of the economy.”
Banks largely greeted the move to increase the bank levy with resignation. Although there was some anger on the ground, Anthony Browne, chief executive of the British Bankers Association, said of the levy increase: “The banks are committed to meeting all of their tax obligations. What they ask – along with all businesses – is stability in the tax system so they can reasonably plan for the future.”
One source at a large bank said further rises to the levy were expected: “It’s based on the size of balance sheet, and they are shrinking. It’s basically a fact of life.”
Nic Arnold, senior manager at PricewaterhouseCoopers, said: “The Chancellor has shown he is keen to maintain international business confidence in the UK by reducing the corporation tax rate and accelerating the tax deductions available to business on capital investment.
While he has at the same time confirmed that a General Anti-Abuse Rule will be introduced in the UK, this has been long expected and should go some way to simplifying the UK’s anti-avoidance legislation.”