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Budget 2009: The business view

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31st Mar 2009
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Following a survey of business owners across the Thames Valley area, David Fawcus of accounting firm James Cowper LLP reveals what their hopes are for this year’s Budget and how businesses are coping with the recession.

This year’s winter seems to have been especially long and hard, and not just because of a heavy snowfall. The increasingly frosty economic climate has been felt by all and, as James Cowper’s annual pre-Budget survey of businesses shows, there are varying views on when we can expect sustained recovery in the economy.

The exceptionally late Budget statement, to be delivered by Alastair Darling on the 22 April, has more riding on it than perhaps any Budget delivered by this Labour government since its first in 1997 when Gordon Brown stepped up to the dispatch box.

With such a late Budget it is likely that many of the government’s intentions will be announced or leaked before its statement to the Commons as the government continues to intervene to lessen the impact of the recession. Then there is the question of the timing of an election - this date could be announced soon after this Budget.

At James Cowper we asked our clients and contacts (businesses across the Thames Valley) for their thoughts on the recession and the impending Budget. Gordon Brown and Alastair Darling can take some encouragement from the findings, but they would do well to listen to what our 180 respondents have to say.

The blame game
Respondents were first asked to rank in order of who or what they blame the most for the recession from the following list: the banks, the media, global factors, public attitude, and the government.

Over half (56%) of all respondents lay the blame primarily and perhaps unsurprisingly on the banks. The government is held to blame by 19% of respondents, with 19% blaming global factors.

It has often been said that we ‘talk ourselves into a recession’, but on asking respondents whether the media is to blame, just 5% agreed. However, over a third (36%) acknowledged that the media may have had a peripheral effect. Interestingly, respondents do not blame their own attitudes.

Government action
Businesses across the Thames Valley have generally an upbeat view on the government’s efforts to help businesses survive the recession, although the majority (65%) believes that the government could do more.

Three quarters of respondents do believe the government’s bailouts to industry have been helpful, and 67% believe that the recent interest rate cuts have also been of help.

However, three quarters also say that the government’s temporary reduction in the rate of VAT from 17.5% to 15% following last November’s pre-Budget report has had no effect whatsoever, with a further 15% stating that it has probably hindered efforts to lift the economy.

Forecasts
In November’s pre-Budget report Alastair Darling estimated public sector borrowing to reach £118 billion, a figure that was seen as rather more hopeful than realistic. Going into this year’s Budget we asked our respondents to help Alastair Darling estimate a more likely public sector borrowing requirement. Unsurprisingly, not a single respondent believes that it will remain at the predicted level. However, just over one third (36%) suggested that the public sector borrowing prediction would stay below £200 billion. Just under a third (32%) said that it would top £300 billion, and 6% suggested that it would exceed £500 billion. One respondent even went as far as suggesting that it would top out at a frightening £800 billion.

Want to know more? Read the full version of this story on AccountingWEB.co.uk's sister site Finance Week.
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