And The Rest: the non-housing highlights of Budget 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.
- The Treasury opened a consultation on bringing all gains on non-resident disposals of UK property within the scope of UK tax. This will apply to gains accrued on or after April 2019. Residential property is already covered by these rules.
- From April 2020, income that non-resident companies receive from UK property will be chargeable to corporation tax rather than income tax; and gains which arise to non-resident companies on the disposal of UK property will be charged to corporation tax rather than CGT.
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.
2018 was an outstanding year of office take-up across the UK regional and SE office markets. Can 2019 reach the same dizzying heights? CBRE’s new UK Office Property Perspective reveals record breaking take-up activity (of nearly 7.5 million sq ft) in...
The term “smart” can be a prefix for a whole host of things: phones, motorways, tickets, cards, buildings. And also cities, many of which are making concerted attempts to become smarter as a way of generating a range of economic, social, cultural and...
Over the past three years, HMRC have taken over 2.2 million sq ft of new office space across 11 regional centres. But have these deals been pivotal to the success of the UK regional office markets or have they simply added to the already growing...
CBRE’s latest London report ‘Why we can bank on London’ explores the three key challenges facing the financial sector: Brexit, changing regulation and the growing influence of fintech. The UK is the most specialised major economy in financial services...