SHARES in FTSE 250 engineering firm Weir Group dipped by almost two per cent yesterday after it announced to the stock exchange that President Trump’s tax cuts would be “broadly neutral” for its business.

Among the changes introduced by the Tax Cuts and Jobs Act, which came into effect on January 1, is a reduction in the corporate tax rate from 35 per cent to 21 per cent.

Weir, which generates around a quarter of its revenues in the US, said the changes would likely result in a one-off tax credit for the business but added that this would be offset by other measures introduced by the act.

Loading article content

“The measures included in the act, subject to any further specific guidance on interpretation being released, are likely to give rise to an initial one-off non-cash tax credit in 2017 resulting from the revaluation of the group’s aggregate US deferred tax assets and deferred tax liabilities following the reduction in the US federal rate of corporate income tax,” the firm said.

“Going forward, from 2018 the favourable impact of the headline federal rate reduction is likely to be largely offset by greater restriction on the level of interest deduction allowed in the US, leaving the overall impact of the act on the group’s effective tax rate broadly neutral.

“Based on this preliminary assessment, the group’s effective tax rate for 2018 is likely to be around 25 per cent.”

Shares in the business, which closed the previous day at £22.56, were selling for £22.12 at the end of trading yesterday.

Despite this, the shares are still close to their highest level in three years after oil price woes saw them dip to well below £10 in January 2016.