New funding, taxation and incentives announced today are designed to help the UK play economic catch-up
The Chancellor of the Exchequer has today delivered a budget that is likely to have a wide-reaching impact on industries related to or dependent on ICT.
In what George Osborne said was a “fiscally neutral” budget across the period, he highlighted a number of measures designed to help the UK become a world leader in advanced manufacturing, life sciences, creative industries, business services and green energy.
“Britain has lost ground in the world’s economy and needs to catch up,” he told the House of Commons.
Building on carbon commitments
One of the boldest measures will see the UK become the first country to introduce a carbon price floor for electricity generation from 1 April 2013. The starting price will be £16 per tonne, with a target price of £20 per tonne by 2020.
The government also announced a larger-than-planned initial capitalisation of the Green Investment Bank of £3 billion, and moved the date it will start operation forward a year, to 2012-13.
Simon Wheeldon, who is founder and chief executive of carbon management software provider CloudApps, gave a cautious welcome to the introduction of a carbon price floor. “It is needed to drive investment into low-carbon technologies, and it needs that kick start,” he said. “For some technologies, the price set will not be high enough, but at the same time it can’t be set so high as to stifle growth.”
In what Osborne described many times as measures to “make the UK the best place in Europe to start, finance and grow a business,” he pledged to expand the University Technical Colleges programme to establish at least 24 new colleges.
He also announced plans to launch the first Technology and Innovation Centre in high value manufacturing and invest £100 million in science capital development.
Bindi Bhullar, director of HCL Technologies, called particular attention to the budget’s measures to increase the technical skills of the UK workforce. “The UK has long been known as a financial services hotspot, but it is great to see that this budget has not overlooked the wealth of technology talent available to investors and the efficiencies it can bring to businesses, particularly during a challenging economic climate.” Bhullar said.
In accordance with the Dyson Report’s recommendations to support new and innovative businesses, the lifetime limit for Entrepreneurs Relief has been doubled to £10 million and the Enterprise Investment Scheme has been extended. And a moratorium exempting micro-business and start-ups from new domestic regulation for three years from the 1 April 2011 has been introduced.
The small-to-midsized enterprise (SME) rate of research and development (R&D) tax credits has also been increased to 200 percent from April 2011 and 225 percent from April 2012.
Not enough incentive
A blog analysis from tax group Olswang welcomed the increase in Entrepreneurs tax relief in particular. But it cautioned that: “There will be disappointment as there was some hope that the arbitrary requirement to hold 5 percent of ordinary share capital in qualifying companies would be removed to allow incentivisation of a wider class of employees and directors.”
Clodagh Murphy, director of Eclipse Internet, commented: “Small businesses have certainly been through the mill over the last two to three years and the recession has seen a number having to close as a result. However, it is good to see the Chancellor looking to make positive steps to ensure that the backbone of industry in the UK, the small business, not only survives post recession, but also grows and flourishes.”
CloudApp’s Wheeldon added that, as a fast-growing UK business, anything that would cut red tape around investment and people and encourage more science and technology apprenticeships was also “very welcome”.
But he also had an interesting point to make in regards to the limited form of fuel duty stabiliser introduced to mitigate the impact of rocketing fuel pump prices on businesses and households. “While this is a welcome move, it is only a temporary fix,” he said. “Our customers have found that, by tackling this costly issue proactively, they can reduce travel costs by 10 percent and drive similar savings out of energy costs. It’s good to remember there are alternative ways of tackling rising fuel costs than just relying on the government.”
The Federation of Small Businesses (FSB) also welcomed the “fair fuel” duty stabiliser in particular, as well the boost given to apprenticeships and entrepreneurial investment. But it added that the budget “did not go far enough to incentivise job creation”.