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December 5, 2012 3:43 pm
The chancellor’s measures on infrastructure spending, corporate tax and exports went down well with most business leaders, but seem unlikely to spark an immediate move by companies to spend the £700bn on their balance sheets.
The Office for Budget Responsibility cut its forecast for business investment for the next three years and warned that investment would be constrained by poor credit conditions and uncertainty about demand.
The OBR said the growth rate of business investment would edge up from 3.8 per cent this year to 4.9 per cent next, before accelerating to 8.1 per cent in 2014.
John Cridland, director-general of the CBI employers’ group, said the policy announcements in the key areas were the ones he was looking for. However, he added: “The government’s got everything to prove on delivery. We need to see the chancellor’s words translated into building sites.”
John Longworth, director-general of the British Chambers of Commerce, said that while the chancellor had taken a number of positive steps, Wednesday’s Autumn Statement failed to match the urgency of the prime minister’s recent declaration that Britain was in the midst of an “economic war”.
“The government is still tinkering around the edges,” he said. The Budget next March must make truly radical and largescale choices that support long-term growth and wealth creation. That means reconsidering the ‘sacred cows’ of the political class, including overseas aid and the gargantuan scale of the welfare state.”
The chancellor announced plans to raise the annual capital investment allowance tenfold to £250,000 for two years, cut corporation tax by a further percentage point to 21 per cent by 2014 and shift £5.5bn from current spending to investment in infrastructure.
He also announced a £1.5bn facility for UK Export Finance, the export credit agency, to provide loans to overseas buyers of British exports, the first time it has lent money direct rather than giving guarantees. UK Trade and Investment, the trade promotion body, gets a 25 per cent budget increase.
Mr Cridland said the plan to upgrade sections of the A1, bringing the route from London to Newcastle up to motorway standard, was particularly important, as was the £1bn guarantee to extend London’s Northern line to Battersea Power Station.
The rise in the annual investment allowance, which reverses a cut from £100,000 to £25,000 in April this year, was welcomed as “a shot in the arm for the manufacturing sector” by Sir Anthony Bamford, chairman of JCB, the excavator group.
The chancellor also committed £120m to extend the advanced manufacturing supply chain initiative, which encourages the growth of suppliers.
Terry Scuoler, chief executive of EEF, the manufacturers’ organisation, said the chancellor was supporting growth “driven by exports and investment”, but the scale of the economic challenges meant “we cannot afford to take our foot off the gas”.
Retailers welcomed the freeze on fuel duty and a one-year extension of rate relief for small businesses, but warned that a 2.6 per cent rise in business rates due next April would be a further blow to investment and job creation.
Graeme Leach, chief economist at the Institute of Directors, said: “This was a tricky job, well done by George Osborne. Faced with a weaker outlook for GDP growth, the chancellor needed to raise business confidence whilst at the same time keeping the deficit on a downward path. And he largely succeeded, particularly with the surprise reduction in corporation tax.”
John Walker, national chairman of the Federation of Small Businesses, said the chancellor had “listened to many of our members’ concerns”.
Additional reporting by Mark Wembridge
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