Budget leaves ACID taste for designers...

Angus Montgomery from Design Week reports....

Chancellor Alistair Darling’s Pre-Budget Report is ‘rather unhelpful’ to the design industry, financial experts say.

Darling’s report, which was announced yesterday, saw VAT climb back to 17.5 per cent after being cut to 15 per cent for a year, and National Insurance rise by 1 per cent instead of the 0.5 per cent that had been predicted.

The report also saw a planned increase in Corporation Tax deferred, with Corporation Tax on earnings from patents slashed from 21 per cent to 10 per cent. The Enterprise Finance Guarantee Scheme, which sees the Government guarantee loans to small businesses, has been extended for a further 12 months.

Ian Cochrane, chairman of management consultancy Tice Group, describes the report as ‘a bit of a non-event’ and ‘rather unhelpful to design businesses’.

He says the increase in VAT is ‘not very good news in terms of consumer spend’, adding, ‘For the man in the street there is now an increase in tax directly on purchases and on income [with the rise in National Insurance] and all, while salaries are being held.’

Cochrane says that while the deferral of the Corporation Tax is ‘welcome’, it will take a while to filter through as the tax is collected annually.

Amanda Merron, partner at accountant Kingston Smith W1, says the increase in National Insurance will ‘put pressure on costs’ for design groups, particularly when combined with the Government-backed national pension plan, due in 2012, which will see employers required to contribute 3 per cent of employees’ salaries to the pension pot.

However, she adds that maintaining the status quo in Corporation Tax is ‘good news’, while the cut in Corporation Tax on patents ‘is trying to stop intellectual property leaving the UK, which is good news for innovation and product companies’.

Referring to this move, Dids Macdonald, chief executive of Anti Copying in Design, says, ‘I think this is a step in the right direction. The UK is becoming a knowledge economy, and anything that Government can do to help produce intangible assets is good news.’

Meanwhile, the Technology Strategy Board welcomed plans to increase the roll-out of high-speed broadband, outlined in the report. Nick Appleyard, lead technologist at the TSB, says, ‘The TSB is already engaged in supporting research that will address the technical and cost issues facing the introduction of ultra-fast broadband within this timescale. Such a broadband capability would fundamentally change the way that British businesses operate and would give us a competitive edge.’