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And The Rest: the non-housing highlights of Budget 2017

by | Nov 22, 2017

Every Budget is a ‘housing Budget’ these days, and today’s Budget from Chancellor Philip Hammond was no exception. The housing section of the official document runs to a record six pages. But what about the rest?

The really big Budget story is the downgrading of economic growth forecasts from 2.0% to 1.5% in 2017, with similar downgrades for future years. This, according to the OBR, is due to extremely sluggish productivity growth in the UK economy. While the UK economy has grown reasonably strongly in the last four years, it’s been population (immigration) growth and employment growth that have driven it. Now that the UK labour market is (almost) full, and now that EU citizens’ home economies are doing rather better than the UK, those drivers of growth are weaker. If productivity isn’t there to fill the gap, then weak growth can be expected. That usually means weaker occupier demand for real estate.

But looking beyond the inevitable headlines about downgraded productivity and growth you can find some useful real estate initiatives. Even setting aside housing, and the abolition of stamp duty for first time buyers (see my colleague Jennet Siebrit’s blog today on that), there was a proliferation of other medium size proposals in today’s Budget on cities, business rates and infrastructure.

Business rates got some attention. Most notably, the Chancellor cut next year’s increase in business rates bills by nearly a quarter, from 3.9% to 3.0%, which doesn’t quite go as far as previous caps on unreasonable inflationary increases, but will be welcome nevertheless.

As we expected, the Chancellor also moved ahead with two other specific tax changes affecting property.

There was also a proposal to remove the so-called indexation allowance that enables companies to avoid capital gains taxes on inflationary increases in the value of assets. Taken together these three items raise the Treasury the tidy sum of £1.5bn by 2020-21 and could have significant effects on investor decisions.

More widely, there was more good news for cities including Belfast (city deal negotiations opened) and Birmingham (a second devolution deal for the newly elected Mayor), and a sprinkling of related additional cash for transport infrastructure. You know the list.

Overall, we noted little real radicalism to catch the eye of real estate decision makers. Perhaps that’s a good thing – certainty and continuity, rather than policy disruption, might well be welcomed by the real estate industry as we head into the most tricky part of the Brexit negotiations.

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