Chancellor George Osborne announced changes in yesterday’s Budget that divided opinion among M&A practitioners.
Chancellor George Osborne announced changes in yesterday’s Budget that divided opinion among M&A practitioners.
With Osborne proclaiming that the government was looking to ‘fuel the tank of the British economy’, he announced that corporation tax is to be cut by 2 per cent, not the 1 per cent originally planned.
Mike Currie, partner at asset management company Foresight believes that Osborne’s Budget plans amount to ‘very very positive news’.
He adds: ‘Across the board it is all broadly positive, I think it’s making the right noises. It generally is a budget that will fuel some growth.’
Michael Harris, a partner in the corporate department at law firm Howard Kennedy, says that any help that the government can offer companies will be beneficial towards moving the economy forward.
However he was apprehensive about how far the Budget would stimulate the M&A market.
He adds: ‘I wouldn’t have thought it will have a direct effect on M&A. It’s the global economic climate that is really quite seriously affecting transactions.
‘I think it’s easy to overstate what the government in this country can actually do to restore confidence in business.’
Similarly: Charlie Johnstone, director at private equity business ECI, is quick to point out that the announced changes may not materialise into the kind of growth hoped for.
Commenting on the change in corporation tax he adds: ‘The caveat here is always the effective rate rather than the headline rate.’
Osborne also revealed that there are plans to change the tax system so that income tax and National Insurance contributions will be aligned or merged into one. Johnstone welcomes the proposed changes, saying that the simplification tax and regulation will do a lot to encourage investment.
‘Long-term, its going to make it so much easier. With less bureaucracy it’s going to be much simpler for people to invest in their companies,’ he adds.
Commenting on the announced doubling of entrepreneurs’ relief to £10 million, Currie says it is a ‘great shot in the arm’ for people who want to release some value and build their businesses further.
Looking forward Harris adds: ‘I think these changes will take effect slowly. In terms of business confidence, there is a lot of pressure on companies but this will be a good confidence booster more than anything.’
Currie also believes that confidence has a big part to play in moving the economy forward and increasing M&A activity.
He comments: ‘The mood music is just as important, in terms of the confidence in knowing what we are doing going forward, as the genuine financial benefit itself.’
