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Impact of budget on South West region
July 2010
Donald Barr, Economics & Evidence Manager at the South West
RDA, commented:
"Measures announced in today’s emergency budget will help the
region’s businesses during this recovery period. With 455,920 small
and medium-sized enterprises in the South West, moves to cut the
small companies’ tax rate to 20 per cent should be well
received.
"It is very welcome that the South West should not be considered
a part of the ‘Greater South East’ and will be eligible for the
NICs concessions for new enterprises. (The three-year scheme will
exempt new businesses from up to £5,000 of employer NICs payments,
for each of their first 10 employees hired.) Treasury estimates say
this could assist 54,000 businesses in the South West. The regional
growth fund also sounds like good news for the South West, and we
await the detail with interest as to how it will be
administered.
"The new higher rate capital gains tax could make owning a
second home as an investment vehicle less attractive. This is
likely to result in a reduced demand for both second homes and
associated spending, particularly in the construction sector.
"The Chancellor also announced a repeal of the special tax rules
for furnished holiday lettings presented in last year’s budget. As
the South West attracts the highest domestic tourism market share,
it will come as a relief to the region’s tourism industry.
At the micro level, the budget tax measures do favour the region
because of its lower wages and smaller firm sizes. However, the
risk comes in the public sector spending cuts for which the region
is neither under nor over-exposed. The problem is that the region
is in a particularly weak position to compensate lost government
and consumer demand with investment and export growth. What is true
for the South West as a whole is amplified for the western parts of
the region. Here, higher dependency on the state and domestic
demand will make any growth a challenge."