Pre-Budget Statement: City Reaction: City welcomes `Winnie the Brown leaving the lid on the honey'

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The Independent Online
THE PRE-BUDGET statement received a broadly positive reception in the City and from business organisations. The FTSE 100 index closed 61.2 higher at 6435.5 with equity experts expressing relief that Gordon Brown had not embarked on a spending spree.

Justin Urquart-Stewart, director of Barclays Stockbrokers, said: "The fear was that having got hold of the honeypot he would go out and spend it. But it looks like `Winnie the Brown' will leave the lid on the honey and that's comforting for the City." Mr Urquart-Stewart said the measures to reduce capital gains tax would be important for smaller investors and the measures to boost employee share ownership should improve productivity.

Business organisations were supportive. Adair Turner, director general of the Confederation of British Industry, said: "This is a prudent and business-friendly pre-Budget report. We are pleased with the Chancellor's continued cautious fiscal stance. There is no giveaway ... and that should ease the pressure on the Monetary Policy Committee to raise interest rates." The CBI praised the proposals on capital gains tax and share ownership but said it would need to study the details of the energy tax to establish whether the measures are sufficient for the worst-affected sectors.

George Cox, director general of the Institute of Directors, said: "Broadly, we welcome this Budget. It clearly recognises the importance of creating wealth - to the widespread benefit of society - as opposed to concentrating solely on its distribution. We particularly welcome the changes to capital gains tax, not just the overall reduction but also the time-related sliding scale. This should help differentiate between genuine, long-term investment and short-term speculation." Ruth Lea, head of the IoD's policy unit, said she would like to see a lot more simplification in the tax regime. "Sometimes it is not the tax burden which is a problem for business, it is battling through all the regulations."

Accountancy firms said Mr Brown had not helped small businesses as much as hoped.

KPMG claimed smaller quoted companies had been largely ignored by the Chancellor. Pannell Kerr Forster said the speech was "big on soundbites but lacking in substance" and small businesses would continue to be stifled by red tape.

The Forum of Private Business described the Chancellor's report as a "missed opportunity" for private enterprise. "Those business owners looking forward to the future have little to cheer, as business rates, red tape and regulations have not been tackled," said the forum's chief executive, Stan Mendham.

Steve Alambritis, head of the Federation of Small Businesses, said he was pleased with the end of the so-called "fuel-escalator", which has increased smaller companies'' distribution costs.

He also welcomed the move towards regional development agencies. "We think this might lead to the reintroduction of regional stock exchanges which were abolished in 1973. This would help reduce the City of London's dominance and help avoid the snobbery which sometimes affects businesses from outside the South-east."

Some business leaders were unequivocal in their praise. Alan Sugar, chairman of Amstrad, the consumer electronics group, said: "I have to say I'm impressed. I think the measures on capital gains tax and shares for start- up and high-tech companies will work.

"The small businesses are the backbone of this country. We must not be hoodwinked into believing that it is the GECs and Ford Motor companies - it is the 50-employee and 25- employee (companies)."

The Engineering Employers' Federation said it found "encouragement" for engineering and manufacturing firms. Richard Jeffries at CCF Charterhouse said the report was "not an immediately significant event" for equity markets, though some of the measures could push gilt yields down, which would be good for shares.

Nigel Cope