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Euler Hermes: UK Budget; new cut in corporate tax to stimulate investment

By CreditMan Thursday, March 19, 2015

Starting 1 April, the rate of corporation tax will be cut by a further 1pps, to 20%, the lowest level in the G-20. This move will see corporation tax reduced by 10pps from 30% in 2009, when the first cut was implemented. This will free some additional cash for companies, while further stimulating both domestic and foreign investment through higher rates of return.

A down trend in inward Foreign Direct Investment was reversed from 2009 and, since then, USD91 billion (equivalent to 3.5% of GDP) of capital has been invested in the UK from overseas. The UK government is also aiming at a broader simplification of the tax system and announced a GBP200 million investment in introducing fully-digital tax accounts by 2016, which is expected to reduce the burden on business by GBP250 million each year.

Ana Boata; European Economist, Euler Hermes, said: “The government today also reiterated a target to strengthen relationships with emerging markets and announced a near doubling of funding for UK Trade and Investment (UKTI) activities in China. Moreover, the UK will be the first Western economy to be part of the Asian Infrastructure Investment Bank (AIIB) aiming to support projects in Asia in sectors such as transportation, energy, telecoms and agriculture. Food, electronics, vehicles and machinery are likely to remain the leading export sectors.”