Northern businesses hope for a neutral budget

MOTORISTS, SMOKERS and small businesses could have the most to fear when the British chancellor, Alistair Darling, unveils his debut budget tomorrow against a backdrop of growing economic gloom in the UK.

Darling's budget is unlikely to deliver any welcome surprises for businesses in Northern Ireland, but the hope is that it will not contain any nasty tax shocks either. Business people in the North want a pro-business budget which will encourage investment and stimulate the economy; or, at the very least, they want a budget that is business-neutral.

Last year, Gordon Brown, the then chancellor of the exchequer, increased the rate of tax for small companies from 19 per cent to 20 per cent, and this will increase to 22 per cent by 2009. Small business owners will have to pay an initial 9 per cent tax on profits up to a limit of £750,000 and a higher rate of tax for anything they make over that figure.

Suggestions that the chancellor could also unveil more tax changes for family businesses and small companies would be a major setback for Northern Ireland. According to business advisers PricewaterhouseCoopers (PwC), 89 per cent of the 57,000 VAT-registered small businesses in the North employ fewer than 10 people.

A report due to be published by PwC this month indicates that more than seven out of 10 Northern family businesses want the government to reduce red tape, not increase it, and to cut business tax to improve growth prospects.

But it is not just small firms who are concerned that tomorrow's budget may not be pro-business.

The British treasury has already announced plans to reduce the current 30 per cent rate of corporation tax for larger firms by 2 per cent. But Darling is now under pressure to make a gesture to restore business confidence in the government.

Analysts say that the chancellor will have to reduce his predictions for growth in Gross Domestic Product to 1.75-2.25 per cent. According to CBI Northern Ireland director Nigel Smyth, this leaves him little room for manoeuvre in the budget.

"The last thing Northern Ireland businesses need are any further cost or tax rises, so how the chancellor performs on that front will be a key benchmark," Mr Smyth said. "Likewise, consumers are facing increasing pressures on their disposable incomes, so any increased taxes there will have knock-on economic impacts."