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Business sector reaction to the UK Budget

17 March 2016

While yesterday's budget has been largely welcomed by the business sector thus far, the response has been less than enthusiastic overall.

Concern was expressed by legal firm Trowers & Hamlin over the adding of 1% on leases over £5m and the effect this will have on investment.

Real Estate team partner Adrian Leavey said this appears to be "contra to the drive to encourage inward investment to the UK. While much of this may be swallowed by larger institutions, what is effectively a sudden, overnight charge may be difficult for smaller, non-institutional investors.

"Investors are encouraged by offers from all over the world – my concern is that this may make the UK less attractive in this area, albeit marginally. Notwithstanding, it won't help an already nervous market where Brexit and inward investment taxes are already having an effect on the cautious," said Mr Leavey.

There was a more positive response to Chancellor George Osborne's efforts from the CBI. Director-general Carolyn Fairbairn described it as a "stable budget" following "a year of surprises".

Ms Fairbairn said the Chancellor had chosen to support business "to grow the economy out of the deficit.

“Businesses will welcome the Chancellor’s permanent reforms to business rates – taking more small firms out of the regime and changing the uprating mechanism from RPI to CPI, which the CBI has long been calling for," she continued.

“The reduction in the headline Corporation Tax rate sends out a strong signal that the UK is open for global business investment, and reforms to Interest Deductibility are in rightly in line with the international consensus.

“Changes to the tax treatment of losses will make it harder for larger scale-up firms and companies that have been through tough times to play their part in the recovery.

“Progress on some key infrastructure projects, from HS3 to 5G, are positive. Investors and companies will be encouraged by the greater clarity and simplification of the Government’s energy policy," said Ms Fairbairn.

EEF director of employment and skills policy Tim Thomas said employers would appreciate the decision not to add further cost to the Apprenticeship Levy and national living wage, while hoping that the "decision not to meddle with pensions tax relief proves long-lasting".

"Some businesses will see changes to national insurance rules on termination payments and more red-tape for those legitimately using personal service companies as unnecessary and potentially costly," he said.

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