SMALL design businesses should welcome the Labour Government’s first budget, although the feelgood factor it has created may not last, predict some industry spectators.
The lot of small- and medium-sized design groups will be improved through the drop in corporation tax rate from 23 to 21 per cent, making small companies’ rate lower than the basic rate of income tax.
“[This] should encourage investment in the future. The higher capital allowance tax rate for SMEs is a major benefit for product design,” says Business Link Hertfordshire design advisor Rob Doak.
“Plant equipment costs always figure greatly in new product development and any assistance in reducing this burden and hence encouraging investment in new product design is welcomed,” he adds. It will also benefit consultancies looking to upgrade technology.
Management consultant David Jebb cautions that the initial good reaction to the budget may not last long as the strength of the pound, so damaging to exporting clients, has not been effectively tackled.
“The manufacturing economy is being affected and this in turn will affect design consultancies’ work and margins come September,” he says.
Amanda Merron, partner at accountant Willott Kingston Smith, backs this up. “[The predicted increase in] interest rates would lead to an end of the feelgood factor.
“There is anecdotal evidence that businesses are growing again, and growth needs cash. If interest rates go up that could knock that growth back,” she says.
Design was mentioned by the Chancellor in the budget last week, being described as one of the creative industries at which the UK is a world leader.
Chancellor Gordon Brown’s tax break for the film industry will also potentially have a knock-on effect for on-screen graphics and title sequence specialists.