Overall, George Osborne’s budget is tough but fair. It will hit jobs, spending, and hamper recovery, but in the end it was necessary for the greater economic good.
Here is my take on how Chancellor George Osborne’s budget impacts small business, the ICT industry, and Retailers.
Small Business – The Corporation Tax reductions will produce a competitive entrepreneurial environment for British business. For the UK economy to recover, we need to increase small company creation, and reduced corporation tax will be a key driver.
Two other points that will help small business:
1) Special incentives for new companies whereby they don’t pay NI on the first 10 employees, which will certainly increase the competitiveness of the UK in fostering small, local service firms and start-ups.
2) ‘Entrepreneur’s Relief has been extended to the first £5m of any capital gain in your lifetime at 10% - encouraging most small business owners to still sell their business when the time is right without a massive fee to the tax man.
UK ICT Industry – No shocks here. Osborne reiterated the £6.2b already saved this year, and further cancellation of £2b in projects that were previously approved in 2010. Education and Health are largely protected – good news. Many of the details will be laid out in the upcoming Spending Review to take place on 20 October. This much we know, Health and Education are protected, but those departmental budgets that are not protected are in store for a cut of about 25% by 2014. ICT suppliers to the UK government should be very worried.
Retailers – The biggest increase is of course the widely anticipated bump up of the VAT to 20%. The VAT increase will hurt consumer spending and is certainly bad news for Retailers. It is important to note that this is still below most of the EU, and that items like food and child clothing are not charged VAT.
This makes the current world cup season even more important to consumer electronics retailers (come on England!), and further magnifies the importance of the run up to Christmas shopping, as the VAT increase will dampen January sales.