A budget designed to spread the cause of 'made in Britain'

A budget designed to spread the cause of 'made in Britain'. That was the claim made by Chancellor George Osborne in his second Budget this week.

With no fresh cuts to announce, Osborne focused on incentives to encourage UK business growth, including an announcement that corporation tax would be slashed by 2 per cent from April 2011 and then a further 1 per cent in each of the three following years, taking it to 23 per cent..

The budget could be good for business, reckons the National Outsourcing Association. "The National Outsourcing Association welcomes the Chancellor's budget, and in particular the commitment made to boosting enterprise in this country," said Andy Rogers of the National Outsourcing Association. "New measures, including an increase in Income Tax relief on the Enterprise Investment Scheme, and the introduction of a new Enterprise Capital Growth Fund which will provide more than £37.5 million of equity finance to SMEs, are clearly aimed at easing the burden on SMEs.:

"It's clear that those looking for Mr Osborne to scrap the measures introduced after last year's Spending review were always likely to be disappointed by today's announcement.  However, it's clear that the government is looking to make good on its recent pledge to attack what the Prime Minister calls the 'enemies of enterprise' and by offering support to British entrepreneurs,  it's clearly good news for those looking for a more diverse range of outsourcing suppliers, and not just those able to offer the fattest contracts.

"Indeed, today's budget announcement should ensure that the pool of smaller suppliers able to take a slice of the public sector pie will become even deeper, which perhaps signals a commitment from the government towards a rise in multi-sourcing."

But the Chancellor ignored a pre-Budget plea from NOA to invest in project management training to enable public sector organisations to cope with multi-sourcing. "It's a surprise that we've seen no pledge from the government in terms of training those in the public sector to deal with this rise," said Rogers. "Very few workers in the public sector will have any experience of how to manage a number of different suppliers effectively, so perhaps it would have been a good move for the government to set aside some budget towards training public sector workers in this respect? Given the expected rise in more outsourcing, more private sector engagement within the public sector, and the likely scaling back of the public sector workforce, it would have made sense to invest more in training to make this workforce increasingly mobile.

"This investment in training might even have been expanded to further support smaller enterprises, which have no real experience in dealing with contracts.  Another way the Chancellor could have demonstrated this commitment to enterprise is to introduce incentives to smaller organisations looking to bid for public sector contracts, perhaps by making the bidding process itself tax deductible."

Overall the Budget was a mixed bag for the technology sector, reckoned accountancy firm Grant Thornton. "The Chancellor's budget announcement has provide some welcome, if limited, stimulation to the ICT sector. With most of the tax changes already in the pipeline, much of the Chancellor's good news is linked to tax rises that he has decided to shelve rather than reductions in the current regime," said Niki Dixon, head of Technology at Grant Thornton UK LLP

"However, the announcement of significant improvement to both R&D tax credits and to investor relief will provide a welcome boost for early stage investment in the sector  Research & Development (R&D) provides a key platform for UK business and makes a major contribution to our  competitiveness on the global stage.  The Government has recently consulted on R&D support  and the speed and scope of the changes that have been announced are very welcome given that consultation over R&D tax reliefs only finished on 22 February."

It was indeed a budget for growth up to a point, argued Dixon. "The Government had billed this Budget as one for 'enterprise',  'growth' and 'entrepreneurs', and there were some pleasant surprises for  individual investors who are prepared to back early stage technology companies," she said. "The doubling of the life time limit for Entrepreneur's relief from £5m to £10m of gains will encourage the serial entrepreneur to stay in the UK. We would have liked to see a relaxation of the qualifying criteria but this is a positive start.  For the Business Angel community the improvements in the Enterprise Investment Scheme will bring more companies into the scope of the relief and will increase the amount of investment that can be secured.   This measure should help companies looking for seed funding.

"The announcement of new Enterprise Zones should help high technology manufacturers outside the South East. The Zones are intended to encourage regeneration in deprived areas of the UK by offering enhanced tax reliefs to companies that invest in those areas. Whilst the announcement is welcome, it will not help the wider technology sector where investment  has tended to focus on the South East. The simple logistics of securing skilled staff mitigates against setting up in locations that do not have ready access to that population. The announcement of the intention to remove the 50% tax rate as soon as circumstances allow should help UK business to compete against other technology hot spots.

"George Osborne promised a Budget for ensuring growth and creating  jobs in the future.  ICT is a key sector in the UK providing employment for skilled staff and stimulating innovation to the benefit of the wider economy.  The changes announced should help to support the creation of new businesses and supports the R&D that underpins the future of the sector in the UK."