Industry reaction to the UK government’s 2012 Budget has been largely approving with the most positive reaction coming from the Confederation of British Industry (CBI).
John Cridland, the director-general of the CBI, has praised Chancellor George Osborne for cuts to the corporation tax and personal allowance and for “[sticking] to his guns”.
“Family budgets have been under great pressure, and by putting more money in the pockets of ordinary people, the Chancellor has provided a much-needed confidence boost,” he said.
“An extra 1% off corporation tax this year could make a big difference to investment intentions. Plans to reduce the top rate of tax to 45p by April 2013 will show our top and aspiring talent that this government wants them to create wealth here.”
Paul Mumford, senior investment manager at Cavendish Asset Management, said that this year’s budget represents an economy that is “on the right track.”
“The measures aimed at promoting business and growth – from the reduced Corporation Tax rate to increased infrastructure investment – hold a lot of promise and are suited to a low inflation environment,” he said, adding that the promise of greater investment in North Sea gas exploration will prove beneficial.
This point on developing North Sea exploration is echoed by Angelos Damaskos, chief executive, Sector Investment Managers and fund adviser, Junior Oils Trust, who also stressed the importance of tax relief on decommissioning oil installations.
“We believe that the proposals will give greater confidence to oil companies to invest in North Sea projects by removing the uncertainty on treatment of de-commissioning costs. The support for deep-water exploration will bring the UK system closer to that of Norway, which provides refunds on the majority of exploration expenditure, and stimulate activity and investment in the UK North Sea territory,” he said.
Less positive was the reaction from Trevor Greetham, the director of Asset Allocation at Fidelity Worldwide Investment, who says the budget has not changed the fundamental picture.
“Chancellor George Osborne warns of sharply rising interest rates, should his fiscal tightening plans slip. However, the correct comparison to make is not with countries locked into fixed exchange rates in the eurozone but with the US where fiscal policy remains loose,” he says.
“The ratings agencies downgraded US government debt last year, but it didn’t matter a jot. US interest rates are even lower than those in the UK. Meanwhile, a recovery in the US economy looks set to boost tax revenues. So far doing nothing looks like a much more promising strategy.”