The UK is set to dramatically slash corporation tax rates to woo businesses deterred by Brexit — just as Northern Ireland is preparing to cut its own rate.

While the move places the UK in direct competition with the Republic for vital foreign direct investment, it will scupper Northern Ireland’s chances of attracting investment after the rate here falls.

Chancellor George Osborne has revealed plans to aggressively cut the tax to less than 15% as he outlined his plan to galvanise the British economy.

This would take Great Britain close to the 12.5% corporation tax rate which has been a cornerstone of the Republic’s economy and helped attract major employers including Apple, Pfizer and Google.

The move would also anger some other EU finance chiefs, who have been critical of the Republic’s low corporation tax rate and fear a “race to the bottom”.

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But it will dismay the Stormont Executive, which had advanced plans to slash the local rate to match the Republic’s 12.5% in 2018.

It was also a crucial part of the Fresh Start deal that had brought greater stability to Stormont, and sold the public as a key instrument in building the private sector employment here.

Economy Minister Simon Hamilton claimed recently that a cut in the rate of Northern Ireland’s corporation tax to 12.5% from 2018 would be “a powerful lever that can stimulate economic prosperity”.

SDLP South Down MP Margaret Ritchie questioned the Chancellor George Osborne on the impact that his decision will have on the competitive advantage devolving corporation tax was intended to provide Northern Ireland.

Ms Ritchie said: "Through his decision to cut corporation tax in Britain, the Chancellor of the Exchequer has undermined the competitive advantage Northern Ireland sought to achieve through the devolution of corporation tax setting powers. While not a solution entirely on its own, tax competitiveness was a carefully considered aspect of Northern Ireland’s economic strategy, and the impact of the Chancellor’s recent decision must be examined in detail going forward.

"While the Executive retains the power to lower corporation tax further should it need to, questions must be answered on how further reductions would impact the broader budget for devolved spending and on the likely effectiveness further corporation tax reductions would have on attracting new business to Northern Ireland.”

"With the North’s economy already facing unprecedented levels of uncertainty as result of the EU referendum, the Treasury must now urgently look again at what other options can be pursued to help enhance the North’s economic competitiveness, such as a tourism exemption for VAT, greater financial support for small businesses and additional investment in skills and training."

Stormont Finance Minister Mairtin O Muilleoir said he would explore the Chancellor's proposal with him in forthcoming face-to-face negotiations.

"It is my intention to bring a report to the Executive on the corporation tax options post-EU referendum and following the latest announcement," he said.

"I remain committed to devolving corporation tax powers from London.

"There has been a dramatic change in circumstances since the referendum but it remains my contention that we can do a better job for our people with the devolution of more fiscal powers. Of course, access to the European market and free cross-border trade are essential to our future."

While Mr Osborne had previously indicated that he would slash the corporation tax from 20% to 17% by 2020, this goes much further.

In 2008, UK corporation tax was 30%, and now it looks set to become half that rate.

The Chancellor said the UK must show it is “still open for business” following the decision to leave the EU as he set out plans to create a “super competitive economy”.

Mr Osborne told the Financial Times: “We must focus on the horizon and the journey ahead and make the most of the hand we’ve been dealt.”

Mr Osborne, who had threatened tax and spending cuts through an emergency budget if Britain voted to leave, said he will wait for official forecasts before announcing any new measures. He said Britain faced a “very challenging time” and urged the Bank of England to use its powers to avoid “a contraction of credit in the economy”.

Jonathan Isaby, chief executive of the TaxPayers’ Alliance, said: “The Chancellor is absolutely right to be considering a big cut to corporation tax, as it would show that the UK is ready to seize new opportunities in the global economy.

“But Mr Osborne must be bold and cut the rate to 10% as soon as possible, to really demonstrate that we are open for business, with competitive conditions to match our talented workforce.

“It’s crucial that our politicians have a positive vision for British taxpayers outside the EU, and meaningful tax cuts to boost growth and prosperity are an excellent first step.”

Belfast Telegraph