How will your sector be impacted by George Osborne’s budget? Clare Weir, John Simpson and David Elliott analyse the winners and losers
It’s bottoms up for drink industry
Beer drinkers and brewers were hunkered down for an 3p rise in the price of a pint, but George Osborne showed more than a little support for the industry in his budget speech.
He not only scrapped the price increase, part of the alcohol duty accelerator which increases the price of a pint by 2% over inflation, but replaced it with a 1p cut to the current levy from this Sunday.
The news has been welcomed by the body representing the pub industry here, which agreed with Mr Osborne that the sector needed support.
“Pubs of Ulster welcomes today’s Budget announcement and the chancellor’s decision to scrap the beer duty escalator, as it marks a significant victory for the industry”, a spokeperson said.
“Pubs of Ulster has lobbied extensively to bring an end to the beer duty escalator — which allows duty to increase automatically by 2% more than inflation every year. Since 2008, the escalator has brought about a staggering 42% increase in taxation.”
But it, along with others in the drinks industry, pointed out that duty increases are still planned for other forms of alcohol such as wines, spirits and cider.
Research given boost
Firms in Northern Ireland have welcomed news of an increase in tax credits for research and development.
George Osborne said that “above the line” research and development (R&D) tax credits will rise from 9.1% to 10% for large companies, applying to the company’s full profit and loss account as of 2013, rather than a deduction from taxable profits only.
“This will help make us one of the most internationally competitive places to innovate,” he said.
Ian Edwards, tax director with Ernst & Young said the scheme is a “game changer” for inward investment and the biggest change for R&D tax relief in over a decade.
Jim Knowles, sales and marketing manager with Denroy Plastics, which makes components for the aerospace industry, said that R&D makes up a huge part of the company’s business.
“In relation to new aircraft development, R&D makes up so much of the work we are currently exploring with other companies across Europe, and will form even more of what we do in the future.” he said.
A spokeswoman for planemaker Bombardier added that the credits will encourage companies to move up the value chain and improve their ability to compete successfully and will contribute to the attractiveness of the UK for companies considering where to locate new research projects.
Hauliers are delighted
The scrapping of September’s rise in fuel duty was called ‘good news’ by a haulage firm boss.
Willie Oliver said while the abandonment of the fuel duty rise was expected, it was still a weight off the minds to many.
He said: “Not only has the fuel duty rise been scrapped, but the changes to National Insurance will mean people will start recruiting again and that will definitely be a good thing.
“This Budget has overall been very positive for the haulage industry and for wider industry in my opinion.
“There was a lot of doubt in people’s minds over what would be delivered and there were plenty of fears about cuts. Since this government came to power they seem to have listened to concerns about the price of fuel.”
Mr Oliver, who employs 50 people in Coleraine, is also on the board of the Road Haulage Association, a past national chairman of the RHA and over the last 10 years has also acted as Northern Ireland and Scotland chairman.
Oliver Transport Services operates more than 30 tractor units and around 70 trailers specialising in the movement of timber, steel, pallets, concrete products, hazardous goods and light/heavy machinery.
Boost for social sector
A new tax relief will encourage private investment in social enterprises.
Social enterprises and ‘third sector' firms could have a significant role in the growth and rebalancing of the Northern Ireland economy, according to the Social Finance in Northern Ireland document, launched last year by the incoming minister for finance and personnel, Simon Hamilton MLA.
The paper said the legacy of grant funding may have stifled the development of social entrepreneurs and has recommended that such firms need to be able to win contracts, deliver services or develop their own income streams from leveraging assets.
John McMullan, chief executive of Bryson Charitable Group, welcomed the Chancellor’s emphasis on creating incentives to invest in social enterprises.
“In Northern Ireland Bryson has a growing experience of attracting investment to support its development and growth.
“New society capital has emerged as the Government’s primary vehicle for investing over £600m in the development of social enterprise.
“This announcement will increase opportunities for more imaginative funding vehicles and support the growth of social enterprise.”
Exemption will help to power up our generators
Electricity energy policy makers, and users, in Northern Ireland have been anxiously waiting for a Treasury decision on whether the special plea for exemption from the new Carbon Floor taxation on electricity generators would be acceptable to the chancellor.
Yesterday he gave a firm answer: Northern Ireland, exceptionally in the UK, will be exempt.
This special exemption has several consequences.
In financial terms, the carbon floor tax would have cost the Northern Ireland electricity sector £175m. Starting at £20m in 2013-14, the annual sum would have risen to £45m in 2018-19.
Second, if this tax had been imposed, then the functioning of the Single Electricity Market on the island would have been distorted.
At worst, the extra costs would have made some electricity generators non-viabler.
Third, Northern Ireland is fac
ing an emerging shortage of electricity generating capacity in the next decade. The carbon tax could have hastened the closure of older plant such as in Kilroot. Exemption from this tax, alongside the overdue construction of a large capacity interconnecting grid, are both critical factors in attracting investment in new capacity.
Northern Ireland does need greater clarity on how its electricity generating capacity is to be increased. The Treasury has removed a critical obstacle.
Help for artistic companies is warmly welcomed
In a nod to the growing success of the UK, and in particular Northern Ireland’s, growing creative sector, the chancellor announced tax breaks for those working in the industry
Colin Williams, creative director at film company Sixteen South, said: “The new proposed animation and high end television tax credits are incredibly good news for the UK's creative industries
and companies like Sixteen South. The ability to unlock a tax rebate on UK spend means that it's much easier to keep production here at home as we can now genuinely compete with the lucrative tax efficiencies that other countries have enjoyed for many years.”
There is “considerable economic and social potential” to be harnessed within creative industries, said Stormont’s Committee for Culture, Arts and Leisure.
The committee has published a report on maximising the potential of creative industries in Northern Ireland. It said “clear branding, leadership and collaboration would help to provide a boost”.
Latest estimates show that in 2009 there were 21,000 people in “creative employment” here.
Figures published this month suggest there were an estimated 1,375 creative businesses in 2011.
Creative industries contributed an estimated £329m to gross value added in 2009. Of this music and visual and performing arts showed a rise, up 26% to £34m.
Shale gas tax breaks
The Chancellor has identified tax breaks to encourage the development of shale gas — of which huge quantities could be extracted and exported from Northern Ireland.
Australian firm Tamboran Resources has identified a huge shale gas field near Fermanagh’s border with Co Leitrim. The company is eyeing a £6bn investment which it says could create 600 full-time direct jobs and more than 2,400 indirect posts.
Tamboran claims the projected production of up to 2.2trn cubic feet of shale gas would remove Northern Ireland's dependency on imported gas and the excess gas supply at peak production would make Northern Ireland a significant net exporter of natural gas to other countries.
The company also said that a community investment fund for Co Fermanagh would lead to additional benefits in excess of £2m per year if the proposed fracking project starts production in 2015.
Last month, economists PriceWaterhouse-Cooper claimed shale gas could produce £80bn of energy. In other energy announcements, it has emerged that electricity generators here will be exempt from the carbon price floor from April 1, 2013, there will be allowances for energy-saving plant and machinery, and incentives for ultra-low emission cars.
Clarity on interest rate
With the approaching arrival of Mark Carney in the Bank of England hot seat there had been murmurs that the central bank might not worry so much about trying to maintain an inflation rate of 2%.
While the Chancellor didn’t do away with the much tried and tested means of running the economy, he did tell Threadneedle Street to stop being as coy about revealing its intentions.
It’ll have to provide forward guidance on its interest rate policy to restore some confidence for banks, borrowers and investors.
The US Federal Reserve already does this and it has helped lower longer term interest rates and made it cheaper to borrow money.
It’s another of George Osborne’s plans which won’t cost anything but will help instill confidence and has been agreed by current governor Mervyn King and incoming governer Mark Carney.
Meanwhile, the central bank will continue its funding for lending scheme and will maintain its asset purchase programme amounting to £375bn.