Jonathan Thornton looks at how it will affect businesses

Businesses need to be able to borrow. And every SME you speak to tells you they can’t do so at the moment. And the government’s forecast for economic growth has now been cut again to a miserly 0.6% (halved from the previous forecast). Without growth and little lending available to fund investment and reverse the lack of growth, a reduction in the rate of corporation tax to 20% might be eye catching, and will undoubtedly be popular, but it’s hard to see what it really achieves to address the underlying economic malaise.

The £2,000 per business cut in NICs is open to a similar criticism. A cynic might note the date of introduction of the corporation tax rate, April 2015, as being a few weeks before the probable date of the next election.

More helpful are the fivefold increase in the Small Business Research Initiative; tax reliefs for creative industries (high end animation and visual effects are a relatively unsung area in which the UK has considerable expertise); the local enterprise single competitive fund promoted by Michael Heseltine and plans for extending the new Business Bank. Perhaps they don’t lend themselves as easily to soundbites, but they are more practical. Any initiative that looks to provide funding to business must be good. What remains to be seen though is what underlies these encouraging words. The Business Bank, the apprenticeship scheme, and the SBRI are not new. How they are promoted, how much funding is available and how easy it is to take up that funding will be vital if they are even to scratch the surface.

Jonathan Thornton
Russell-Cooke LLP

March 21, 2013