Business Reaction to Budget 2021
Following on from the Chancellor of the Exchequer’s, Rishi Sunak’s budget yesterday, March 3rd, 2021, where he announced his plans for economic recovery from the COVID-19 pandemic, here are some business reactions:
On the government’s Budget and the new National Infrastructure Bank announced today, Donald Morrison, Jacobs’ People & Places Solutions Senior Vice President Europe and Digital Strategies, said: “The creation of a new National Infrastructure Bank will play an important role in supporting new infrastructure technologies, help to reduce uncertainty and has the potential to accelerate financing to free up large-scale investment across the UK. However, we also need to carefully consider how to design and integrate infrastructure that will be of long-term benefit to all – environmentally, socially and economically. The Government must follow through on its commitments to take into consideration not only how best to invest, but where the structural support will result in the most benefit. An ‘outcome-based’ model for infrastructure planning, one that has social value embedded at its heart, will be essential in ensuring the UK can build back better in a way that is truly committed to “levelling up” and the transition to net-zero.”
Lee Pickett, partner and housing law specialist at global legal business, DWF, comments on the extension to the stamp duty holiday, “Whilst this will be welcome news for the housing market, it will also be met with caution as it merely kicks the can of the withdrawal effect down the road a little. We have certainly seen developers concerned about unhappy customers who, through no fault of theirs, would miss out on the SDLT holiday due their new home not being ready for legal completion in time. Equally, various supply chain and labour availability pressures resulting from the pandemic and/or Brexit, are likely to be key factors in developers being unable to deliver homes before expiry of the SDLT concession period.
“There is an alternative view that the market was functioning well enough when the SDLT holiday was introduced and it simply pushed up prices, removed the advantage first-time buyers had and reduced tax revenue at time when it is most needed. Perhaps the compromise might have been to distinguish between transactions and chains involving new build properties and those which only involve existing housing stock. That, however is not what the Chancellor has decided to do and perhaps that is to do with simplicity of application among other factors.”
Commenting on the extension to the stamp duty holiday and introduction of a government-backed 5% mortgage in today’s Budget, Tom Brown, Managing Director of Real Estate at Ingenious, said: “The Chancellor’s decision to extend the Stamp Duty Land Tax (SDLT) holiday and provide a Government-backed guarantee to mortgages with deposits of just five per cent reflect the importance of maintaining optimism in the UK housing market. This level of support shows that the Government continues to view the housing market as key to the UK economy at a time when the latest Nationwide House Price report confirmed that demand from buyers is being sustained. The support provided by the SDLT relief extension, saving up to £15,000 on property purchases of £600,000 is positive news for our strategy as an alternative lender focused on the affordable end of the market.
Reacting to the chancellor’s spring budget announcement today, David Thomson, head of external affairs at Association for Project Management (APM), the chartered body for the project profession said: “This budget was all about the difficult balancing act of investing for long-term whilst safeguarding the economy through the immediate COVID crisis. The success of this budget will be judged not just against tomorrow’s headlines but against the impact of sustained national and local delivery of major programmes of activity, and in particular: post-COVID recovery, a focus on levelling up and the need to deliver on Net Zero commitments. But these and other initiatives identified by the Chancellor will require investment in project delivery capacity and capability for a sustained period if they are to address successfully these and other emerging challenges.
“Good project outcomes require the right conditions for success. Any announcement of new initiatives must be matched by the capability and commitment to deliver them well, as the vaccine programme is demonstrating.”
Mark Peck, Director, Cheffins says: “Whilst the extension to the stamp duty holiday will be welcomed for those with property sales already agreed, the government here is simply kicking the can down the road with chaos set to ensue once the tax break comes is reduced in June and tapered until September. The pressure on the property industry since the announcement of the stamp duty holiday has been immeasurable and this extension will simply continue to add to the strain already being felt by both buyers and sellers as they look to complete on sales before the end of the tax break. Whilst the Chancellor has attempted to manage this with the tapering system until September, the property industry will need to brace itself for further pandemonium throughout the summer months. Whilst the stamp duty holiday certainly allowed the property market to continue with full force throughout the coronavirus pandemic and ensure that property sales continued at a fast pace, it has created an unhealthy scenario with values increasing at unsustainable levels within a short space of time. Stamp duty has long been the Treasury’s golden goose and has filled government coffers for centuries, and whilst the lack of stamp duty paid over the past year will have been felt by the government in terms of income, this extension will ensure that the property industry continues its current bull run over the next three months. The property industry has long been a marker for the overall health of the economy and ensuring that transactions continue will encourage more spending on a wider scale as well as alternative investment decisions as the UK looks to follow its ‘roadmap to recovery,’ however, the impacts once stamp duty is reintroduced could be major, and these will remain to be seen from September onwards.”
Gavin Graveson, Executive Vice President Veolia UK and Ireland said: “Now is the time for a defined narrative and clear pathway towards net zero. As offices and businesses are preparing to reopen, it is essential that we take a new, more sustainable approach.
“One of the most impactful environmental changes we can make is through our energy choices. Decarbonising heat needs to be at the top of all of our agendas. While this year has seen some progress towards greener heat supply, we need clearer financial drivers to allow an overhaul, and drive the systemic shift towards low carbon and renewable energy for homes and businesses.”
Sean Keyes, director, Sutcliffe, said: “I expect taxes to stay static for now and although they will rise in the future it is light relief for us now that there won’t be any extra expenditure during a time when cash-flow is tight for thousands of businesses and employees.
“I am glad support has been provided for those businesses that have struggled the most especially in the hospitality sector and as the director of a construction firm we continue to welcome the Government’s drive to push construction across the country – especially in healthcare and residential housing.
“Financial support to encourage apprentices is also fantastic and with the Kickstart Scheme and other programmes now well underway thanks to the extra £126m boost for traineeships, the future generation now has the perfect platform to strive.”
Ben Hancock, Managing Director of Oscar Acoustics said: “As a company who invests heavily in the training and upskilling of its workforce, the Government’s ‘Help to Grow’ initiative is a welcome response to the all-so-common skills shortage which is prevalent in the industry. We know from experience that there’s a healthy appetite amongst employees for further training. This latest initiative will help provide the gateway they need to reach the next level in their career. This isn’t just important for the individuals who work within SMEs, but also marks a wider commitment to the future prosperity of UK business and industry, of which construction will be one of many beneficiaries.”
James Singer, Associate Director at Nexus Planning and a High Streets Task Force Expert said: “From a town centres perspective, this budget seeks to tread a very careful line between providing much-needed support to high street businesses that were already struggling prior to the pandemic, and nods towards future reforms that are necessary for the longer-term sustainability of many town centres.
“For businesses that have been unable to trade consistently for the past year, the loss of reserves and costs of reacquiring inventory and staff, and pivoting back to a physical location, may be considerable. The announcement of restart grants recognises these costs and seeks to ensure that businesses do not face a ‘cliff edge’ as existing grants end, when businesses can least afford the hit. Equally, the extension of the 5% reduced rate of VAT for the hospitality sector will provide a degree of relief for another six months, with a stepped approach before returning to previous levels. Whether it will be enough to save businesses on the brink is difficult to say, but initial signs from larger companies’ share prices shows signs of encouragement.
“The extension of the business rates holiday for a further three months, and a reduction for the remainder of the year is also welcomed, and essential to sustain high street businesses given the well-publicised issues with the current approach. However, the announcement avoids the wider question of reform. This is unsurprising given last month’s announcement that the government’s fundamental review of business rates is due for publication in autumn 2021.
“The future of business rates, and how a possible tax on online retailing could even the playing field, is one of the most important factors for high street businesses, and will likely have a far greater impact on the long term prosperity of our town centres.
“Furthermore, the announcement of the extension of the Towns Fund to a further 45 town centres is notable, unlocking key public sector interventions and investment across the UK and attracting accompanying private sector investment. The scale of projects varies across the towns, but the most ambitious plans can help to address fundamental spatial issues in the makeup of centres that pre-date the recent lockdowns.”
Dominick Veasey, Director at Nexus Planning and Head of Research & Analytics said: “Within the current Covid-19 period of significant economic uncertainty, the timing of the Planning Reforms White Paper back in August 2020 was to a large extent very unhelpful for the construction sector. Particularly given many construction sites shut their gates and ceased work for several weeks during the first national lockdown.
“Thankfully, with appropriate Covid-secure measures, the gates were allowed to remain open during subsequent lockdowns. Nevertheless, many resource-stretched local authorities started to pause, or at least slow, local plan preparation having digested the implications of the White Paper reforms – understandably, to avoid abortive work.
“Without any unforeseen delay as the reforms are debated and scrutinised within the Houses of Parliament, the government still expects it will take two years to get the proposed reforms in place. Unfortunately, planning reform uncertainty is therefore likely to continue to frustrate the construction sector for the foreseeable future, especially where Local Plans are out of date. The government must do everything it can to help minimise planning uncertainty as the post-Covid19 economy starts to recover.”
Stamp Duty and Mortgages
“The Stamp Duty Land Tax holiday certainly helped keep the housing market buoyant over recent months. Confirmation that it is being extended in full to 30th June and then incrementally phased out by October 2021 is therefore welcomed. However, one wonders whether the positive psychology of a potential economic ‘bounce back’ together with tax incentives to purchase property in the ‘tax break window’ will simply put upward pressure on the already strong housing market – especially given the relatively inelastic supply of new build housing.
“The mortgage guarantee scheme, which offers incentives for lenders to offer 95% mortgages, will also certainly help attract specifically first-time buyers in the market. But this could further exacerbate issues raised above in relation to house prices rising.”
“The location of eight new Freeports was confirmed, these being: East Midlands Airport, Felixstowe and Harwich, Humber, Liverpool City Region, Plymouth, Solent, Thames, and Teesside. Locations with Freeport status will benefit from tax reliefs and simplified customs, but interestingly also simplified planning restrictions. The detail of individual Freeport zones and the extent to which planning restrictions will be simplified will be interesting to follow in due course. Freeports are expected to significantly boost the local economy, but in practice are likely to have much wider economic benefits and development opportunities.”
“Whilst Covid-19 understandably dominated the Budget, it was disappointing that some of the potential post-Brexit construction sector issues and challenges were not covered more fully. Potential issues such as availability of EU labourers and ensuring the timely flow of materials construction products and materials. Indeed, with regard to labourers, Office for National Statistics (ONS) data indicates that around 10% of the UK total construction workers in 2019 were from the EU. The reliance on EU labourers is likely to be higher within main urban areas. For example, within London, ONS data suggests 38% of construction workers are from the EU.
“For the construction sector to fully contribute to helping the economy recover and grow, it will be essential for the government to ensure the sector has a ready labour force supply and the construction materials it needs. Guarantees for these within the Budget would have be welcomed.”
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