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Last Updated: Monday, 5 December 2005, 18:28 GMT
Firms' pre-Budget reaction mixed
Gordon Brown
Firms are divided on whether Mr Brown's proposals are good enough
Business reaction to Gordon Brown's pre-Budget report has been mixed.

While the majority of businessmen, women and groups are supportive, a sizeable minority say the chancellor still isn't doing enough to help UK companies - be they large or small.

Here are the key proposals from the pre-Budget report that will affect the business community:

  • Extension of research and development (R&D) tax credits.

  • The establishment of a UK-wide network of innovation centres to support business start-ups.

  • Extension of New Deal training schemes.

  • Widening of VAT payment flexibility for small businesses. The annual turnover of firms eligible will be extended from the current 660,000 to 1.35m.

  • New tax credits for the film industry. To be set at 16% for large budget films and 20% for smaller movies.

  • Extension of first-year capital allowances to 50% in the year from April 2006, benefiting 4.2 million small businesses.

  • Doubling of tax on North Sea oil companies' profits.

    Robert Symons, chief executive of utility company Western Power Distribution, broadly welcomed the chancellor's pre-Budget report.

    "I would personally welcome any measures that stimulate growth in both R&D and training," he said.

    "Training is particularly vital for the UK economy. I think the pre-Budget report is pretty good news for UK businesses."

    'Little impact'

    Ed Reeves, managing director of North Wales-based reception outsourcing group Moneypenny, was also generally in favour of the chancellor's new proposals - with some exceptions.

    Honda factory in Swindon
    More help for R&D has been generally welcomed

    "The widening of research and development is a fantastic announcement, and one that will have far reaching implications for all business sectors," said Mr Reeves.

    "I'm also very pleased that the VAT flexibility threshold is being extended, but it was ridiculously low to begin with.

    "As for the national network of innovation centres, so often things like that have very little impact.

    "And regarding the New Deal, it hasn't really taken off."

    Oil woes

    Derek Leith, head of oil taxation at accountants Ernst & Young, attacked the doubling of tax on North Sea oil companies' profits.

    "Gordon Brown's decision to increase the rate of tax suffered on the profits of oil and gas companies operating in the UK is a body blow for an industry that is only just recovering from the corporation tax increases introduced in 2002," he said.

    The Federation of Small Businesses Wales was generally hostile to Mr Brown's proposals.

    Spokesman Russell Lawson said he feared the new R&D tax credit scheme would remain too complex and bureaucratic.

    "Most small firms won't benefit by the extension of the R&D tax credit scheme, because the application process is far too laborious," he said.

    "What would be much better would be a soft loan system like that in place in the US. That is a much simpler and more efficient system."

    While Mr Lawson welcomed the extension of VAT flexibility, he again thought the whole VAT payment system remained far too time consuming for small firms.

    He also questioned the idea of a network of business innovation centres.

    "There is a real philosophy of innovation centres, but they are pretty pointless without the necessary infrastructure," he said.

    "To build an business incubation centre in the middle of nowhere for the sake of it, and without the necessary infrastructure, is utterly pointless as there is no incentive for the company to stay in the area in question once they are established."

    'Great help'

    Robert Deri, chief finance officer at Yorkshire-based computer software and DVD company Zoo Digital, said he particularly welcomed the increased R&D credits.

    "We are investing quite heavily in research and development, so this will be great help for us," he said.

    "When you make a substantial investment in research and development, you can build up losses, so more support here would be much welcomed."

    The EEF business group said the pre-Budget report offered "little pre-Christmas cheer for British manufacturers".

    "Time would be better spent simplifying the existing tax system rather than papering over its current complexities," the EEF said.

    Regional film agency Screen Yorkshire welcomed the new tax relief for the UK film industry.

    "The new tax relief will mean Screen Yorkshire will be able to attract more production into the region following on from the successes of recent features such as My Summer of Love and Calendar Girls," it said.

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