BCC Pre-Budget Report reaction

Reacting to the Chancellor’s Pre-Budget Report, David Frost, Director General of the British Chambers of Commerce (BCC), said:

“The Chancellor’s Pre-Budget Report sets out some good schemes to support businesses – like the extension to the Enterprise Finance Guarantee – but these have been undermined by the announcement of an additional hike to National Insurance Contributions in 2011.

“It’s clear that NIC rises mean a brake on employment growth. While everyone understands the importance of restoring the public finances to a sustainable path, a tax on jobs is not the way to do it.”

"The Chancellor's medium-term growth predictions are optimistic, and we would still like to know where this growth is going to come from if taxes, like National Insurance, go up and directly impact on business."

“Businesses across the country still want to see the detail of how the Chancellor intends to cut the public sector deficit, and ensure more sustainable levels of public spending. Investor confidence depends on it.”

Commenting on the macro economic elements of today’s PBR, David Kern, Chief Economist at the BCC, said:

"The PBR acknowledged that the official 2009 GDP forecast in the Budget was too optimistic. The recession was clearly much deeper than previously envisaged. The Chancellor’s GDP growth forecasts for 2009 and 2010 are now realistic and achievable.

“Expectations that the UK economy will grow by 3.5% in both 2011 and 2012 are too optimistic. The forecast uses assumptions of spare capacity in the economy that may prove to be too hopeful. The reality is that some of the economy's productive potential was very probably lost during the recession, and it is unwise to assume that we can easily recover this capacity.

"To the extent that the official GDP growth forecasts are too optimistic, the predicted reduction in the budget deficit over the next few years would be slower than the Chancellor envisages. His forecast that net debt as a share of GDP will peak at 78% in 2014/15 before falling, appears unrealistic.

"This means that to ensure Britain's international credit rating is not threatened, he may have to be more aggressive in his future public spending cuts. Most importantly he will have to abandon measures that negatively impact on business, such as the proposed increase in NICs."

Ends

Media Contact:

Sam Turvey
Tel: 020 7654 5813
Email: s.turvey@britishchambers.org.uk

Notes to Editors:

Further BCC comments for publication

On the Enterprise Finance Guarantee (EFG) extension:

"BCC has led the calls to improve access to finance for credit-worthy businesses during the recession. We are pleased that the EFG scheme, which has supported viable businesses seeking funding, has been extended. This scheme will continue to help good businesses meet their working capital needs, and help the economy turn the corner.”

On Investment Allowances:

“The Government has missed an opportunity to support business investment during the recovery. Extending enhanced capital allowances for another year would have been a fiscally-responsible but effective way of promoting investment.”

On a freeze to the rate of Small Companies’ Corporation Tax:

"Freezing the rate of small business corporation tax at 21% is a very welcome move. It will be business, and particularly small business, that drive recovery. So we are pleased that the government has realised it cannot restrict the private sector's ability to invest, grow and create jobs. Going ahead with April's increase would have added an unnecessary financial burden on hard-pressed SMEs."

On the Growth Capital Fund:

“Companies across the country say getting financing of £1m to £10m is a major growth barrier. We support efforts to establish a Growth Capital Fund – fulfilling one of the key recommendations of Sir David Rowlands’ report on growth capital for small and medium-sized businesses.”

On Empty Property Rate Relief:

“We called for the Government to extend the existing business rate exemptions for smaller businesses, and are pleased that they have taken further temporary action. There is, however, a real need for a genuine long-term solution to the issue of empty property rates, which threatens viable businesses of all sizes.”

On the levy on bank bonuses:

“While there is much anger out there about bank bonuses, focusing on them is a distraction from the two real issues facing our economy: allowing businesses to invest, grow and create jobs, and reducing the country’s deficit.”

The British Chambers of Commerce (BCC) is the National Voice of Local Business.
The BCC sits at the heart of a powerful nationwide network of Accredited Chambers of Commerce serving business across the UK, which employ over five million people.