If Red Ed was the unlikely, dominant talking point at this year’s Conservative Party conference, another, more relevant to this industry, was conspicuous by its absence.
Business rates had got deserved airtime at both the Labour and Liberal Democrat conferences. Both parties urged reform. The Tories, curiously, seemed intent on getting away without mentioning it at all. It was only when pressed by EG, that communities secretary Eric Pickles made it clear the Cabinet had no intention of reform.
As a tax it is easy to see why business rates is so liked by Pickles and governments at large. It is a tax where the cost of collection is low, the take predictable and risk of evasion small. And unlike with personal taxes, since the tax base itself can’t vote, the pressure to respond to malcontents is very much reduced.
That doesn’t make it fair, however. In a contracting economy, where retailers especially have seen their revenues shrink – and often their rents – their business rate bills have grown steeply as a proportion of their cost base. That seems to me to fail at least one of Adam Smith’s four canons of taxation. But as the prime ?minister told the faithful in Manchester: “We are still ?spending more than we earn.” The government cannot – ?and perhaps should not – put the exchequer’s income at ?risk. But an improving outlook – confirmed in this week’s ?EG/Grosvenor property sentiment survey (p60) – offers room for manoeuvre. Pickles should think again.
¦ Knight Frank posted stellar results this week. Its ambitions to grow to a $1bn (group) business by 2017 are on track. Double-digit percentage growth in employment levels is also welcome news. However, even if the firm achieves that goal, it will remain only a fraction of the size of CBRE and JLL, which turned over $6.5bn and $3.9bn respectively last year.
Size isn’t everything, of course; client satisfaction is much more important. But size matters in a global economy and, to borrow, Cameron’s phrase again, in the “global race”.
DTZ is clear in its ambition that it wants a seat at the top table of global firms post its likely 2015 flotation, and the sprint to keep up with the two advisory giants is very much on.
It looks ever more likely, however, that it will take sizeable M&A activity just to keep CBRE and JLL within sight.
It is worth bearing in mind than if a $5bn business posts 10% revenue growth in a 12-month period that’s a $500m rise. A ?$1bn business has to grow by 50% just to maintain the revenue gap. Narrowing that gap is only going to get harder.
¦ Mission Possible: that’s the theme of next Thursday’s LandAid Day. Last year, £83,000 was raised for disadvantaged young people in the UK thanks to the property industry’s sterling efforts. Innovation, humiliation and perspiration will be much in evidence again next week. I hear table tennis, cycling and pin the head on the James Bond are all on the cards this year. Waxing is rumoured.
At EG Towers we’ll be baking cakes. At our Manchester Question Time on Thursday and Glasgow Focus reception on Friday we will be rattling a tin. We are supporting and taking part in the treasure hunt. And keep an eye out for details of a special EG/LandAid spin class later this month.
We are also going to be opening up our Twitter account to the industry. If you want us to broadcast a 140-character message to the property profession – and our 23,000 followers – let us know. In return for a donation to LandAid, we’ll tweet your message. Click here to tell us what and make your donation (£5 suggested).
Damian.Wild@estatesgazette.com
