How the 2012 Budget was Good for Business in the UK

The Chancellor of the Exchequer announced the 2012 budget on March 21, 2012. This budget will be generally beneficial to businesses in the United Kingdom in several ways. These include the corporate tax rate, government investments in businesses and new Enterprise Zones.

Corporate Tax Rate

The most significant benefit to businesses in the 2012 budget is the reduction of the corporate tax rate to 24 percent. The new tax rate will have the following effects:

  • Businesses will have an additional £800m each year to reinvest in expansion
  • The UK will be more favourable for businesses than other countries such as France, Germany and the US.
  • The corporate tax rate should further decrease to 20 percent within five years.

Investments

The 2012 budget includes measures such as the Finance Partnerships and Enterprise Finance Guarantee, which will continue government investments in business. The budget will also increase the UK Export Finance and Building Fund, which will promote business growth. The Building Fund is especially beneficial to construction companies that need large amounts of capital.

The 2012 budget includes the Pension Infrastructure Platform. This measure authorizes the investment of £2bn from UK pension funds in infrastructure, which will provide a source of corporate financing. The budget also provides corporate tax relief for companies that produce TV shows, animation and video games.

Additional benefits to businesses in the 2012 budget include the possibility of greater investments from the European Monetary Institute, which will apply to small and medium enterprises. Tax credits for research and development that start at 9.1 percent are also part of the 2012 budget.

Enterprise Zones

The creation of new Enterprise Zones in the 2012 budget will encourage the development of businesses within these areas. The government offers financial incentives to businesses that start up within an Enterprise Zone, typically in the form of tax relief. This will also provide attractive investment opportunities for investors throughout the UK.

The Welsh Government established five new Enterprise Zones on April 2, 2012. Each zone will provide tax relief for specific businesses that invest in expansion and machinery within that zone. Businesses that will benefit from these Enterprise Zones are as follows:

  • Advanced manufacturing firms in Deeside
  • Aerospace firms in St. Athan
  • Energy firms in Anglesey
  • Financial services firms in the Cardiff Central Business District
  • Manufacturing firms in Ebbw Vale

Reactions

The reaction of business leaders to the 2012 budget has been mixed. Simon Walker, director general of the Institute of Directors, said, "There was a bold move on corporation tax, but in the bigger picture, this is still not far enough or fast enough." John Cridland, director general of the Confederation of British Industry, said that the chancellor “has sent a powerful signal to companies to invest, do business and create jobs in the UK."

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