Chief Executive’s Blog: Initial Budget Reaction

From a business perspective, George Osborne’s emergency budget could have been an awful lot worse.  I haven’t seen anything in the initial analysis which has given me major cause for concern for BWF members or the joinery industry, although I suspect we will all feel our personal finances severely pinched. We should welcome the Chancellor making good on the promise in the coalition agreement to create the most competitive corporate tax regime in the G20 by reducing the standard rate of corporation tax by 1% with a commitment to reduce by a further 1% over the coming years until it reaches 24%.  The small business rate also reduces to 20%.  In a move to reward those who create successful businesses, the 10% entrepreneurs capital gains tax rate for lifetime gains is increased to apply to the first £5m rather than £2m. But there’s an element of sleight of hand, as this budget inevitably takes back some of what it gives away.  So capital allowances for plant and machinery will be reduced from 20% to 18% from April 2012 (10% to 8% for longer life assets) and the Annual Investment Allowance will reduce to £25,000.  We don’t have the full picture yet.  I’m relieved that there’s no further reduction in capital spending totals, but we’ll have to wait until the autumn and the conclusions of the spending review before we know how the funds will be allocated.  Let’s not forget that we are still looking at the £100bn cut in capital spending over the next five years set out by Alistair Darling in the March budget.  According to the Construction Products Association, that means a fall of one-third by 2014-15.  We have to hope that the Chancellor and the Treasury recognise the multiplier effect to the economy of investing in built environment and target resources where they can strengthen the recovery.