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NEWS Tuesday, 9 March, 1999, 18:52 GMT
Business backs the Budget
Budget reaction graphic
Business leaders and trade unions have welcomed the chancellor's decision to cut taxes, introduce a raft of new measures to promote enterprise and broaden share ownership.

However, there are concerns that the Budget will reduce the chances of an imminent cut in interest rates by tempting consumers to spend more.

Dr Ian Peters, Deputy Director General of the British Chambers of Commerce (BCC) said: ¿We welcome the chancellor¿s extensive package of measures to support enterprise and entrepreneurship. The 10p rate of corporation tax for new businesses, the Enterprise Management Incentive and the R&D (research and development) tax credit are all helpful measures.

Share price screens
Business and the City were generally happy with the Budget
Bill Callaghan, chief economist at the Trades Union Congress, said: "The Chancellor's "Shares for All" plan is an important step forward. While share ownership can help to increase employee financial involvement, it is vital that this is accompanied by genuine involvement of employees in the company's decision making processes. Employee involvement is a key ingredient in improving the performance of companies."

The London Chambers of Commerce and Industry said the corporation tax changes in the Budget made the UK "the most attractive business location in Europe".

Simon Sperryn said: "Further changes that business will heartily welcome include the tax breaks for entrepreneurs, tax breaks for R&D and the proposals to promote the distribution and use of IT."

He added however that there "remain concerns about the extent to which the Budget measures will add to the bureaucracy firms will have to deal with.

Damage limitation

Justin Urquhart-Stewart of Barclays' Stockbrokers said that the Budget was far less damaging to investors than had been feared. He welcomed the proposals for wider share ownership and said changes to inheritance taxes and capital gains tax were better than expected.

London shares were boosted by the Budget measures, particularly the 1% cut in corporation tax. The FTSE 100 closed 29 points, or 0.5%, higher at 6,238.

"Basically, it was OK for the market... It was fairly neutral, with no big surprises," said the head of UK equities trading at a European bank.

Adair Turner, Director General of the Confederation of British Industry, said: "This Budget does not represent a radical change for business. We asked for a boring Budget and this is not a bad result."

Retailers also gave the Budget a cautious welcome. Pamela Webber, economist at the British Retail Consortium, said: "On balance it is a reasonably good Budget for retailers, but there are some checks and balances there...we are still unhappy about the excise duties on alcohol and tobacco."

Interest rate fears

Ruth Lea, head of the policy unit at the Institute of Directors said: "It looks a touch generous to me...our worry is of course the reaction of the Bank of England - they may not cut interest rates as much as we would have liked them to."

Dr Ian Peters of the BCC said: "The sting in the tail may be that, in what could be described as a give-away Budget, the Bank of England may have less room to reduce interest rates than we would have wished.¿

John Calverly, strategist at American Express Bank also warned that there could be less scope for further Bank of England rate cuts in the coming months.

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