When asked to describe the consequences of the French Revolution, Zhou Enlai, a former leader of Communist China, is reputed to have replied: “It’s too early to say.” And so it is with Gordon Brown’s last Budget as chancellor.

There is no doubt that, from a business perspective, the whole package came against the background of rising anger among FDs at the size and complexity of the tax burden.

The temperature of this debate has been rising in recent months, fuelled by surveys such as one from the CBI, which showed that one-fifth of the FTSE 350 were thinking of relocating their headquarters overseas to escape HM Revenue & Customs.

Finally one broke cover – Barclays revealed it was willing to locate its head office in the Netherlands as a sweetener for a merger with Dutch investment bank ABN Amro.

The issue is being closely watched by FDs because if Barclays, the UK’s eighth-largest company, were to up sticks it would be a bellwether for the rest of the UK corporate community.

Small countries will try to attract more businesses by lowering taxes. This will favour big companies as they can move more easily than small firms. Ireland is a shining example of this – it has cut corporation tax from 32 to 12.5 per cent and ten per cent for manufacturers.

This is credited with attracting companies such as online retailer Amazon and software firm McAfee.

The CBI’s survey also found that more than one in five companies had already relocated one or more activities abroad and a further 17 per cent were considering relocation. Almost all of these firms cited the tax regime as a key factor in their decisions.

Against that background it is hardly surprising that the chancellor used the Budget to gain some business-friendly headlines. Now the dust has settled, the headline cut in corporation tax is not all it seems.

The Budget was “fiscally neutral” – on balance it neither took money out of the economy nor put it back in.

Analysts swiftly noticed that the 2p cut in the main rate of income tax is paid for by the abolition of the 10p starter rate and the 2p cut in corporation tax is funded by the abolition of certain allowances.

The cut in corporation tax does make the UK slightly more competitive internationally. However, when one considers the abolition of certain allowances, the picture changes somewhat.

From 2008-2009, writing down allowances on qualifying plant and machinery will be reduced from 25 to 20 per cent a year, while the industrial and agricultural buildings allowances regimes will be phased out and finally withdrawn in 2011.

In other words, companies in sectors such as IT, that will not have heavy investment budgets, will find it more financially pleasant to stay in the UK.

Infrastructure companies, manufacturers, farmers and transport firms that would have found it harder to move get hit with the bill for the corporation tax cut.

Oddly the position is reversed for smaller companies. From 1 April the small companies’ rate of corporation tax increased from 19 to 20 per cent on its way to 21 per cent next year and 22 per cent in April 2009. Here, the money is returned to small business in the form of higher allowances.

So, conversely, the winners are small manufacturers and the losers are small services companies with low investment needs and moderate profits. Given the rush of manufacturers to move overseas, this makes sense.

Only time will tell if it stems the flow of companies moving overseas but if the polls are anything to go by, time is something Brown may be short of.

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