Yesterday, the Chancellor of the Exchequer Phillip Hammond delivered his Budget for 2018, setting in stone the Government’s plans for spending and revenue-raising for the year ahead.
It was a speech light in detail, so as we study the fine print of the ‘Red Book’, we present to you our initial views from a cross-section of business lines at Colliers International giving reactions to the announcements made.
Oliver Kolodseike, Senior Property Economist for Colliers International, said: “The Office for Budget Responsibility mildly upgraded their growth forecasts and now expects the UK economy to grow at 1.6 per cent in 2019. This is up from the spring forecast of 1.3 per cent. However, 2018 growth was revised down to 1.3 per cent and trend growth is forecast to remain very modest, between 1.4 per cent and 1.6 per cent. It is important to note that both the Budget announcements and OBR forecasts are based on the assumption of a reasonable Brexit deal and smooth transition and the Chancellor pointed out that he is confident, but not complacent that such a deal can be achieved.
“Should the UK crash out of the EU without a deal in place, a new Budget and more pessimistic forecasts would follow and the Chancellor has allocated an additional £2.2 billion for Brexit preparations."
UK High Streets
David Fox, Director, Colliers International’s Head of Retail Agency – North, said: “In essence ‘The Future High Streets Fund’ is a good idea, and one that private landlords with access to funds and the vision had already been doing. If this means councils buying property themselves in order to regenerate stock then it will offer landlords with portfolios going nowhere an exit strategy – albeit at bottom dwelling prices.
“Also, it will only stack up where there is demand for alternative property classes – big cities and metropolitan areas. In former industrial towns it would need to be part of a much wider regeneration initiative to bring jobs and other forms of investment.”
Paul Souber, Head of Retail Agency London, Colliers International adds: “It’s an acknowledgment that our general UK high streets need to be repurposed, so they regain vitality but this must also include looking at these towns holistically to make sure we are providing a cohesive place and a reason to shop live and work there. i.e. is not just about retail but office and co-working space, industrial and logistics, residential and leisure all supported by a decent transport infrastructure.
“This is a positive step, but it also requires wholesale reform of planning rules to enable this change quickly and the wholesale reform of business rates.”
Stamp Duty Land Tax
Ashley Osborne, Head of Residential at Colliers International: “Buried within the ‘Red Book’, the Chancellor has pledged to publish a consultation in January 2019 on a SDLT surcharge of 1 per cent for non-residents buying residential property in England and Northern Ireland.
“Introducing a 1 per cent surcharge for overseas buyers will only put further pressure on housing supply, as foreign demand enables many developers to build more homes. The government continues to push the false belief that foreigners are buying up homes in the capital in droves and leaving them empty, despite the fact there is almost no evidence to suggest this is the case. The sub £600,000 price bracket – already popular with domestic investors and Help to Buy purchasers – will become even more overburdened by an increase of foreign buyers looking for lower priced properties in order to reduce their exposure to higher levels of SDLT. Rather than addressing the housing market’s real problem, namely a fundamental lack of supply, if introduced, this new tax will only create a smoke and mirror effect that detracts from the real housing crisis.”
John Webber, Head of Business Rates, said: “The Government has clarified that the changes in business rates it proposes are targeted at small and medium sized retail businesses, particularly those with a Rateable Value (RV) of between £15,000 per annum and £51,000 per annum, who previously did not receive reliefs on their business rates. By retail, the Chancellor is including pubs, cafes, petrol stations etc. in its definition. Such businesses with a RV of £51,000 or less will see their bills cut by a third.
“This is all very good, but this does nothing to help the big retailers who have been hammered by the 2017 Revaluation, both in terms of massive business rates rises in some areas and the overpayment of rate bills in other areas, where, due to downward phasing, many rate bills have been kept artificially high. The lack of support for the likes of Debenhams, House of Fraser, Homebase shows a total misunderstanding of what is at issue in the high street and could very well lead to more high street closures and job losses.
“A lot of retail businesses will be looking at what reliefs they have already received and seeing if they will actually be better off from these measures, particularly in the pub trade. The Chancellor has targeted help at the smaller and medium sized businesses, but it is not just in one direction and is not as far reaching as has been implied. Most of the High Street is at the mercy of escalating business rates- the failure to address this issue will just mean the carnage on the high street will continue.”
Andrew McFarlane, Head of UK Regions for Colliers International, said: “The increased funding into the ‘Transforming Cities Fund’ across all regions, alongside specific regional investment, including £20 million in Future Mobility funding for the West Midlands and up to £37 million additional funding to support Northern Powerhouse Rail, are all positives for our regions and a step in the right direction in tackling the UK’s combined productivity challenge.
“What really matters is regular investment over a long period – 30 years or more. So long as we see continued investment across the regions from one year to the next we will over time see real progress. Each new investment builds on the prior to create a compounding effect, which will be clear for all to see after a number of years.”