Budget 2009: business reaction – more needed to be done

The general consensus among the business community is that, while the 2009 Budget contained some useful measures, it did not do enough to tackle the problems facing both the economy and individual firms.

The CBI expressed concern whether the Budget set out a credible and rigorous path for restoring the public finances to health.

Richard Lambert, the CBI's director general, said: "The CBI's preliminary judgement must be that it does not."

Mr Lambert continued: "The Chancellor's economic forecasts for next year and beyond look optimistic. By pushing out the horizon for balancing the books as far as 2018 the government is running too much of a risk.

"On the fringes of this Budget, there are some worthwhile micro measures, including support for businesses struggling to access trade credit insurance, and for carmakers through a time-limited scrappage scheme. The changes on investment allowances and the ability for firms to carry forward losses are also welcome."

On business tax, Mr Lambert was disappointed that the Chancellor had nothing to say on next year's increase in National Insurance Contributions for employers which he described as "a tax on jobs".

The CBI also wanted a reversal of policy on empty properties. "Rates on empty property have forced companies to cut staff, and can make the difference between surviving the downturn and going to the wall," added Mr Lambert. "The government should also look at postponing the reintroduction of the 17.5 per cent VAT rate by a month to cover the New Year sales period."

More action, too, had been urged by the EEF, the engineering employers' group.

Gilbert Toppin, the EEF's chief executive, said: "Given the most difficult economic conditions for a generation, the Chancellor has gone some way towards alleviating the short term pressures facing companies. The measures on investment, trade credit, low carbon technologies and car scrappage are helpful though he should have gone further to make a real difference."

Mr Toppin also voiced dismay that the Budget had failed to provide support for short time working but had increased the costs of redundancy payments.

While welcoming the rise in investment allowances, Steve Radley, the EEF's chief economist, argued that the move only provided limited incentives for the new investments small and growing manufacturers need to make to capitalise on the upturn.

The Federation of Small Businesses (FSB) felt that the Chancellor had largely ignored the needs of smaller enterprises.

Though applauding the establishment of the trade credit scheme, the FSB claimed that the government should have gone further in tackling late payments by giving Companies House the necessary clout to use powers within the Companies Act to name, shame and fine companies which fail to pay on time.

John Wright, the FSB's national chairman, said: "A government funded wage subsidy for short-time working would have been a real help but was totally ignored.

"Small firms will also be disappointed not to have received the benefit of automatic rate relief. This will have boosted small businesses to the tune of £400 million."

He added that the FSB welcomed the fact that capital allowances for firms investing more than £50,000 will double to 40 per cent but was unhappy that the 2p rise in fuel duty is going ahead from September.

Phil Orford, the chief executive of the Forum of Private Business (FPB), thought that the Chancellor had missed a vital opportunity to produce a Budget for business survival and economic growth.

He said: "While some of these measures will benefit low-carbon companies and new technology start-ups, they will do little to restore business and consumer confidence and stimulate economic activity."

Acknowledging the value of changes to capital allowances and loss relief, nevertheless Mr Orford went on to say that the measures will have only provide limited benefit to smaller businesses, while restrictions to the new credit insurance scheme and the failure to address business taxes remain barriers to business survival and growth.

David Frost, the director general of the British Chambers of Commerce (BCC), believed that Chancellor appeared to have understood that business will drive the economy out of recession, and that there were some good measures in the Budget to reflect this.

On the extension to carry-back loss, Mr Frost said: "It will help with smaller business cash-flow. But the Chancellor may have considered increasing the £50,000 carry-back limit to really make a difference.

"Nevertheless, the doubling of the capital allowance will have a positive impact, as will the expansion of the HMRC business support service."

However, David Kern, the BCC's chief economist, worried that the Chancellor's predictions of 1.25 per cent economic growth in 2010 was too optimistic, even if expansion resumes towards the end of the year.

Also unrealistic in Mr Kern's view was the forecast of very rapid growth for a number of years from 2011.

He said: "If the Chancellor's growth forecasts prove indeed to be too optimistic, there will be adverse consequences for the credibility of his forecasts for the public finances."