Shot in the arm for local firms
Plans to stimulate regional business growth welcomed
Published 24/03/2011 | 08:00
Plans contained in yesterday's Budget will make Northern Ireland a better place to do business.
The measures include the removal of £350m worth of regulation on businesses and an increase in the bank levy rate next year, a move planned to offset any benefits for banks from a UK-wide corporation tax reduction.
UK corporation tax will be reduced by 2% from April 2011 - rather than 1% as previously announced - and will fall by 1% in each of the next three years to reach 23%.
Meanwhile, new rules will apply a 5.75% rate on overseas financing income to attract international investment. The business mileage allowance will also be increased from 40p to 45p.
Funds have been provided for 21 new enterprise zones, with 10 more to be announced in the summer.
Chancellor George Osborne said that while none will be in located outside England as yet, the Government will work with devolved administrations in Northern Ireland, Scotland and Wales to implement a similar scheme.
Northern Chamber of Commerce president Francis Martin said that Northern Ireland should be classified as an enterprise zone in order to help stimulate job creation and grow the private sector.
"Our view is a region-specific reduction in corporation tax can be a major step in rebalancing the Northern Ireland economy and we welcome the commitment to engage local ministers on this issue," he said.
"The UK-wide 2% reduction in corporation tax does not address the unique situation in Northern Ireland," he added. "The fact that we have a land border with the Republic with their lower tax rate puts Northern Ireland at a significant disadvantage when it comes to securing direct investment. This is our moment for overcoming this drawback."
There were other positives for the Northern Ireland business community to be gleaned from the Chancellor's speech - the freezing of the rise in air passenger duty until next year will be a major boost to local companies whose business relies on regular travel throughout the UK, while the sweeping changes made to European Investment Schemes should help funding for indigenous Northern Ireland firms.
Joanne Stuart, chairman of the Institute of Directors in Northern Ireland, said that in the current climate of sluggish growth, the Budget measures will be welcomed by businesses but said that the Treasury consultation paper on options for lower corporation tax in Northern Ireland is more important for the future.
"We hope this paper will persuade the new Executive to take the radical steps required to rebalance our economy," she said.
Nigel Smyth, director of the CBI Northern Ireland, said that the Budget will help to businesses to grow and create jobs.
"The extra 1p cut in corporation tax will help firms increase investment," he said. "A reduction in regulations on businesses is welcome, while the reduction in fuel duty and postponement in increasing air passenger duty are particularly welcome news from a Northern Ireland business and consumer perspective."
"Support for manufacturers through the Climate Change Agreements will help them manage energy costs.
"From a NI perspective, the most significant announcement is the publication of the consultation paper on corporation tax."
Roger Pollen of the Federation of Small Businesses said: "The FSB has been leading the call for the designation of Northern Ireland as an enterprise zone and the announcement that 21 are to be created in England will strengthen our case for a similar scheme to be introduced here."
Eamonn Donaghy, head of tax at KPMG Belfast, added: "Mr Osborne indicated this Budget was aimed at encouraging growth and providing a fairer tax system. Time will tell if either or both of these objectives are met."
The percentage by which corporation tax will be cut across the UK in 2011