Budget 2020: What real estate needs to know

Just four weeks into his new role, chancellor Rishi Sunak has unveiled his hotly anticipated 2020 Budget. Employing prime minister Boris Johnson’s regularly used motto, it is a Budget that will “get things done”. Headline points revolved around “levelling up” the regions, accelerating housebuilding, cutting business rates for some businesses across the retail, leisure and hospitality sectors, and introducing stamp duty on foreign buyers. Coronavirus The chancellor unveiled his Budget addressing the news on everyone’s mind: coronavirus. Sunak said the virus will have a “significant impact on the UK’s economy”, but he insisted it would be temporary. Nevertheless, a £12bn plan to minimise the economic impact of the outbreak was announced. Statutory sick pay will be paid to everyone who needs to self-isolate because of coronavirus, even if they have no symptoms. Businesses who employ fewer than 250 employees will be able to apply for a full refund for the first 14 days of sick leave each employee takes. In a business rates shake-up over coronavirus fears, Sunak announced he would be abolishing rates for the coming year for firms with rateable values below £51,000. This not only includes retailers, but businesses across the hospitality and leisure sectors. The news has been met with criticism. John Webber, head of rating at Colliers International, claimed the government is “kicking the issue into the long grass”. Webber said: “They are showering the money on people who are already being helped out, and bigger businesses, be they retail or anything else, are being left to wither on the vine.” Melanie Leech, chief executive of the British Property Federation, said: “The business rates relief for small businesses is welcome but actually one of the biggest killers for business of all sizes is the downward phasing in business rates. “It would have been very easy from our perspective to get rid of that and to allow all business to move towards the amount  they should be paying now rather than continuing that phasing and that would have helped businesses of all sizes.” Mike Flecknoe, a partner at Cushman & Wakefield, said: “It is disappointing there was no business rates support in this Budget for large business, even those occupying multiple lower value properties given the impact of State Aid Rules, nor other sectors outside retail, leisure or hospitality. “The Chancellor did announce that the promised fundamental review on business rates will take place but will not report until the Autumn. It is a pity that he did not use this opportunity to scrap downwards transition to assist all those ratepayers paying artificially high rates.” Nick Stewart, partner at MMX Retail, said: “Again, many retail landlords will be left disappointed by the business rates announcement in today’s Budget. Many had hoped for a higher threshold than was announced by the Chancellor. These savings are paramount to any investment into the retail landscape and we all know that needs to happen now.” A business rates discount will also apply to pubs with a rateable value below £100,000 in England, extending to £5,000. And the £1,500 business rates discount for office space used by local newspapers in England will be extended for an additional five years, until 31 March 2025. Levelling up Sunak needed to deliver cash and policies that would keep newly acquired voters in regional areas happy. Therefore, in a bid to “level up” the rest of the country, he said more than 750 staff from the Treasury and other departments will move to a new “economic decision-making campus”. Over the next 10 years, the government will move 22,000 civil servants outside of London. In addition, areas outside of London will be able to reap the benefits of the £22bn funding allocated for R&D. As a percentage of GDP, it will be the highest in nearly 40 years, according to Sunak. A new West Yorkshire mayor has also been appointed, Sunak said, and a metro mayor funding package of £4.2bn for transport investment was also announced. Bruntwood director of strategy Jessica Bowles welcomed Sunak’s announcement that the government will have a larger presence in the regions. “Our current centres of power in London must get closer to the regions so it’s heartening to see concrete plans to move elements of Whitehall outside of the capital,” she said. “The people making policy need to experience the reality of the UK regions in order to understand them.” Colliers International head of research and economics Walter Boettcher said all these measures should boost “renewed momentum” into developing the regions. “Regional stakeholders should take comfort in affirmation of the government investment intentions and find renewed confidence in formulating their own development plans and initiatives to tap into the wealth of domestic and international capital available to do the heavy lifting across all regional markets,” he said. Housing A package of measures to boost housebuilding across the country was outlined. To support local authority investment, interest rates on lending for social housing will be cut by one percentage point. The government will also consult on the future of the Public Works Loan Board. Around £12.2bn will be pumped into building affordable homes, and £1.1bn will be used from the Housing Infrastructure Fund to build infrastructure to unlock a further 70,000 homes in nine “high-demand” areas including Manchester, South Sunderland and South Lancaster. A £400m brownfield housing fund will also be established for pro-development councils and mayoral combined authorities. The government plans to invite “ambitious” bids. Additional housing investments totalling £328m will also be made in York Central, Harlow and North Warwickshire. There will also be a £10.9bn increase in housing investment to support the commitment to build at least 1m new homes by the end of the Parliament, averaging 300,000 homes a year by the mid-2020s. Pete Gladwell, head of public sector partnerships, said the renewed emphasis on directing funding towards places lacking investment was “encouraging”. He added that the fact the government recognised the “important role of combined authorities and local authorities,” and gave them the agency to “shape their own destiny”, is “really promising”. However, he questioned the continued reliance on borrowing on the financial markets to deliver the capital required to meet regional needs. “We need to be co-creating solutions that involve equity, local communities, and the capabilities that our industry has to offer, such as our development expertise, to ensure funding actually delivers results,” said Gladwell. “Sadly, we’re in danger of perpetuating a model where local authorities go cap in hand to the Treasury, which borrows from the capital markets and fills the caps that are most politically expedient. “That isn’t the optimal solution, particularly as more people in society want their pensions to actually do good and be recycled within their local communities.” Nearly £650m of funding will be provided to build 6,000 homes for rough sleepers. Foreign buyers hit by 2% surcharge The government will introduce a 2% stamp duty surcharge on foreign buyers purchasing residential property. This is below previous threats of 3% from the prime minister and will take effect from 1 April 2021. The measure has been introduced to control house price inflation, giving preference to UK buyers. Profits will be used to address rough sleeping. Tom Bill, head of London residential research at Knight Frank, said the introduction of a 2% stamp duty surcharge will “bring the UK into line with many other global property markets”. He added: “Attempts to ease affordability pressures in the wider housing market should be welcomed, although the new measure will need to be monitored carefully to ensure there are no unintended consequences, including for the forward-funding of new-build developments.” He added a “wider rethink of stamp duty rates” is still needed to “increase housing market liquidity and maximise any stimulus the government plans to provide to the UK economy”. Grenfell measures Under pressure to respond to growing concerns about the number of high-rise towers that still contain unsafe cladding, the government revealed substantial funding to address the issue. A £1bn Building Safety Fund has launched, which will remove all unsafe combustible cladding from every high-rise private and public sector tower over 18m.   To send feedback, e-mail lucy.alderson@egi.co.uk or tweet @LucyAJourno or @estatesgazette