Losers

Big employers

The service sector is likely to bear the brunt, with low margins and high staff costs.Corus, the UK’s largest steelmaker, said the NI increase would cost it an additional £5m a year by 2004. The group employs 27,000 people and last year made a pre-tax loss of £462m. Retailers gave a mixed message on the impact. Tesco, the supermarket chain, said it was still calculating the additional cost but that the increase in NI was ‘a tax on employment’. ‘We feel as though we are being punished for our plans to create 9,000 jobs next year,’ it said.

Other retailers said the impact would be relatively small because of the high number of part-time staff in the sector.

BT, the telecommunications group that has 110,000 employees, said the change would cost an extra £20m to £25m from next year. The cost had been mitigated by the large number of part-time workers in its call centres.

Consignia, the state-owned postal group that is losing £1.5m a day, said it would have to pay an additional £35m to £40m a year. It employs more than 200,000 people and wages account for more than 70 per cent of its costs.

Oil groups

Oil companies operating in the North Sea will have to pay an additional £1.15bn in taxes over the next three years following the introduction of a 10 per cent surcharge on their profits. That is net of enhanced allowances for new capital expenditure, which are expected to help some of the smaller exploration and production companies.

BP and Royal Dutch/Shell, the UK’s largest oil groups, will see their costs increase by about £120m and £100m respectively. BG, the gas producer, is expected to have to pay an additional £40m a year - almost 10 per cent of last year’s profits. Enterprise Oil, which is being acquired by Shell, will be even worse off, paying an additional £35m compared with profits last year of £297m.The additional tax could be partially offset by plans to scrap oil royalties, which apply to fields developed before 1982.

Foreign companies

Foreign companies operating in the UK through branches, especially banks, will face £1bn in extra taxes in 2003-04 and 2004-05 because of changes to the taxation regime for such branches. Banks will also suffer a £570m hit over the same period because of changes to the tax treatment of loan relationships, derivative contracts and foreign exchange dealings. The government is also mulling changes to the non-domicile tax status which allows wealthy foreigners living in Britain to avoid paying tax on their overseas income. That could make it harder for City institutions to recruit.

Manufacturers

Most manufacturers felt they missed out on the Budget because of a lack of any measures to help them on areas such as capital investment, coping with the climate change levy and improvements on the country’s transport infrastructure.

There were particular gripes from engineering companies that had wanted new forms of tax relief to encourage incremental increases in R&D, which might be expected to benefit smaller concerns, rather than the volume-based R&D tax credits that are expected mainly to help large businesses. Corus, the steelmaker, said the national insurance increases could lead to job cuts among manufacturers.

Winners

NHS suppliers

Increased spending on the NHS is likely to benefit companies ranging from Huntleigh Technology - manufacturer of hospital beds - to cutting-edge biotech companies. Technology companies will benefit from improving IT systems across the NHS to cope with the introduction of electronic patient records. The extra spending is likely to benefit niche companies such as Newchurch and Torex, which make computer systems for doctors' offices as well as major hardware suppliers.

Medical equipment manufacturers such as Gyrus can expect to benefit from an increase in keyhole surgery. Investment in infrastructure could also be good news for Amersham, the medical imaging group, and United Medical Services, which provides high-tech medical equipment, as hospitals upgrade their facilities.

Pharmaceutical companies

Pharmaceutical companies were the main recipient of direct industrial support in the shape of a £400m-plus R&D tax credit. But they can also expect to benefit from tax relief on goodwill and increased prescribing of drugs.

The R&D tax credit is designed to halt the emigration of R&D to the US, but the Association of the British Pharmaceutical Industry said it was too early to say how much of the new NHS money would be spent on drugs.

Companies ranging from GlaxoSmithKline, the UK's largest pharmaceuticals group, down to biotech outfits such as Alizyme and Phytopharm are also likely to benefit from the conclusions of the Wanless report on the NHS.

Small businesses

Some small businesses should benefit from measures to help entrepreneurship, particularly small incorporated companies. Stephen Alambritis, of the Federation of Small Businesses, said: ‘A small company prudently run with a limited number of employees will benefit from the abolition of the starting rate of corporation tax and the reduction in the small companies tax rate.’

But attempts to reach out to small businesses were given a frosty response by some, who said they would be ‘massively outweighed’ by the national insurance increase.

Construction sector

The construction industry, although facing one of the biggest bills for increased NI contributions, will gain substantially from plans for 42 new hospitals and 750 primary one-stop care centres due to be completed by 2008. John McDonough, chief executive of Carillion, one of the companies expected to benefit from the government’s programme, said: ‘The good news is that the increased spending on health is not at the expense of other sectors like transport where construction and service contracts will also rise sharply over the next 10 years.’

Brewers

The brewing industry emerged as a net gainer as the chancellor froze beer duties and gave a £15m handout to the nation’s small brewers. Brewers producing up to 500,000 litres a year will have their beer duty halved, saving them £40 a barrel. There was a small boost for the cider industry, cutting the cider duty by 1/2p a pint. But spirits companies such as Diageo and Bacardi-Martini stand to lose from an 11p-a-bottle increase in the duty on ready-to-drink cocktails.

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