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SMMT warns of NIC pressure

The Society of Motor Manufacturers and Traders has given a lukewarm reception to Chancellor of the Exchequer Gordon Brown's Budget. It says some of the real issues were ignored.

A key part of Brown's statement concerns the one percentage point increase in National Insurance Contributions, which could put pressure on jobs. Analysts believe dealers will face an average increase in NIC of around £11,000 next year, rising to £15,000 in 2004, the first full year.

This burden will be made worse by falling new car sales. Employers have suggested that the higher tax burden might lead to job cuts - uncertainty over job security is likely to dampen the buoyant new car market as consumers delay making large purchases. SMMT chief executive Christopher Macgowan believes the competitiveness of UK manufacturers will be undermined by the strong pound.

“The Treasury rakes in vast sums each year from manufacturers, hauliers, component companies and drivers,” Macgowan says. “We want sustained support that allows business to grow and develop and encourages investment into the country.”

Alan Pulham, franchised dealer director of the RMI, says the Chancellor's promise to cut the tax rate for small companies from 20p to 19p and corporation tax for firms with profits below £10,000 from 10p to zero would be a massive help to motor retailers.

“This will help small independent service and repair businesses with relatively low profits, and smaller, solus franchised car dealers,” he says.

The RMI says the decision to free excise duty on fuel “throws a lifeline to petrol retailers”, but it is disappointed that a promise made in the pre-Budget report to cut tax on bio-fuels was not mentioned.

Brown intends to introduce a new tax credit to boost research and development undertaken by larger companies. He also is looking to encourage training through Employer Training Pilots which will offer financial support to participating companies.

Macgowan says: “This will support the motor industry's commitment to a sustainable future built on sound environmental, economic and social principles. Training is a key building block for growth and this is good news for the UK.”

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