Gordon Brown promised in his budget to cut corporation tax from 30p to 28p in the pound from April 2008 but this has had a lukewarm welcome.

The cut in the main rate of corporation tax will reassure those companies thinking of moving offshore, says Paul Davies, UK head of tax at Ernst & Young. “However, the gain from the rate reduction will be more than clawed back by the change in plant and machinery capital allowances. As a result it is clear that the main beneficiaries of the rate cut will be in the service sector rather than the manufacturing sector.” This is explained in more detail by our economics editor, Chris Giles in his excellent video summary online.

The net effect will be around a 1 per cent drop in the total taxes borne by business, says Richard Collier-Keywood, UK head of tax at PwC. The FTSE 100 index, which was up 31 points when the chancellor stood up at 12.30 rose during and immediately after the speech but is now up just 36.5 points on the day at 6256.8.

There is some help for smaller companies in the form of increased R&D tax credits and new investment relief. However, they will suffer from the proposal to raise the corporation tax rate for small companies from 19 per cent to 22 per cent. The lobby groups are already working themselves up into a nice sweat about this.

Kevin Nicholson, UK head of entrepreneurs and private companies at PwC, says: ” There is a clear desire to prevent perceived abuses where individuals incorporate to reduce their tax rate, however the system has become very complex.” The FTSE Small Cap index is nevertheless up 27.7 points at 3976.6.

A handful of environmentally-friendly measures came as a boost to companies such as D1 Oils, which is up 6 per cent. Johnson Matthey, which makes products for catalytic converters, is also up, as is SIG, which makes insulation.

Also, British Enegy, the nuclear power generator, is up 4.9 per cent to 483p after Gordon Brown raised hopes of a sale of the government’s stake by saying he would double government asset sales in the current year. C&C Group, maker of Magners cider, is up 3.8 per cent to €11.20 because fears that cider duty would be doubled to a level in line with beer failed to materialise.

For more budget reaction read our market update.

In non-Budget news today, you have to laugh at ABN Amro. Senior executives there, including the chief executive and finance director, bought several thousand shares in the bank last Wednesday. Of course, in the middle of merger talks, this makes them look like villagers. In fact, a spokesman says the purchases were decided on at the end of November and the execution, scheduled for some reason for mid-March, was automatic. Barclays shares are up just over 1 per cent this morning as investors digest last night’s announcement about the deal’s likely structure (see my updated blog from yesterday). This is despite more negative analyst comment yesterday and this morning.

Elsewhere, Tesco has formed a £650m joint venture with British Land through which it will sell and lease back 3 per cent of its UK stores, releasing cash to fund expansion plans. Tesco said the deal, involving 21 stores, would generate net turnover of £570m and lead to a one-off profit of £142m.

The other big news is that Louisiana has dropped its charges against the former chairman of Sportingbet, Peter Dicks. In the same sector, Neteller, the online payment company, says it hopes soon to release funds seized by the US authorities and to distribute them to its US customers.

In a trading statement, Imperial Tobacco said business was in line with expectations and gave nothing away on its plans for Altadis. We have a weak trading update from Chrysalis, owner of the Heart radio station in London.

Kesa, the retail group which owns Comet, reported a 15 per cent rise in full-year profits in line with expectations as it benefited from strong sales of flat screen TVs and white goods like fridges and washing machines.

Tullow Oil reported record full-year pre-tax profits on Wednesday of £263.3m, an increase of 47 per cent, and profits at Weir Group, the engineer, are up 40 per cent. Full-year earnings also from Independent News & Media (in line) and from Ted Baker (pre-tax profits up 10 per cent, promises 10 per cent buy-back).

As they so delicately put it on FTAlpaville, the dog of the day is Inter Link Foods which has issued what may be its fourth profit warning since November. It’s scrapping its dividend, talking to its bankers, etc. The story may get a bit squeezed because of our Budget coverage but the shares down 60 per cent. The stock, which was around 400p at the beginning of February, is now at 70p.

Rumours of the day: Takeover speculation is lifting shares in Premier Oil and SSL International.

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