It has been impossible this year to liken the Chancellor’s 2012 budget to a surprise; much of the contents was leaked in the weeks leading up to the announcement, somewhat spoiling George Osborne’s periodical moment in the spotlight. Nevertheless, the budget this year promises an exciting future for business Britain.
The headline of course is the cut in corporation tax and the promise that it will continue to drop over the coming years. As of next week it will stand at 24% and will be down at 22% by 2014, making Britain a considerably cheaper HQ than many of our global rivals. Our corporation tax rates will be 13% lower than the Gallic and Germanic twin pistons of the European economy, 16% lower than Japan and 18% lower than our American friends, making Business Park UK a very attractive proposition. The application of this tax to both SMEs and large multinationals means that this is clearly an incentive for global business to set up shop in Britain and will hopefully mean a decreasing level of unemployment and a climb out of our continuing pseudo-recession. However, the decision to apply a blanket tax for all businesses no matter what their size could mean tough times ahead for some of theUK’s smaller business who will now be competing on a level playing field with worldwide giants.
Despite this the VAT registration threshold is also to be raised by a few thousand pounds from £73,000 to £77,000 a year meaning that smaller businesses will be able to take home a larger personal allowance than before.
More shocking however is the application of VAT to warm food products. The government’s word on what constitutes warm food is anything that is ‘warmer than the surrounding air temperature’. This includes all hot food, takeaways, heated items served in a bap, bun, cob, baguette, roll or barm and is likely to seriously effect the revenue of several food outlets. It is also certain to lead to accountancy firms advising their clients to wait and make their purchases after the food has cooled down.
In order to cater for the ongoing public distaste for bankers the government has also increased the bank levy to 0.105% in order to prevent banks from benefiting from the cut in corporation tax and to be not seen as having gone soft on the UK’s economic engine. This has been criticised by several leading figures in the financial services industry but is seen by many as a method of reforming the banking industry and using some of its profits to develop other key areas of theUK economy such as manufacturing.
All of the measures have been taken into account by the OBR for their forecasting for the financial year ahead with the British economy now predicted to grow by 0.8% over the course of 2012, revised up from the 0.7% previously predicted. Whilst this sounds utterly unimpressive and will be coupled with a spike in unemployment this year it means that we will hopefully not be suffering the same fate as our European cousins, where the wider Eurozone economy is set to fall back into recession, shrinking by 0.3% over the course of the year to come.
The major criticism has been however that the government has not done enough to encourage job creation, and in failing to cut employment law red tape has now left the UK languishing in 84th place when it comes to the easiest countries in which to hire an employee. With unemployment set to peak it is likely that the recruitment industry in general is in for a tough year ahead.
The outlook therefore, even across our summary, is mixed. Whilst British interests seem to be, at least steadily, on the up, the promise of further recession across the channel looks set to threaten any successful efforts put in. Having said that, the UK government’s current set of policies seem to put the best interests of business at heart and will hopefully serve to stoke the fires of British business once more and allow us to continue to weather the storm.
