Comments on the implications of the Autumn Statement welcome, send to Stewart@compropscotland.com
Support for property industry, but concerns remain, says British Property Federation (BPF):
Given the perilous state of public finances and the economic maelstrom at home and abroad, the Chancellor’s Autumn Statement went about as far as the property industry could have reasonably hoped today.
With many of the announcements widely trailed ahead of time, there were few surprises. Notable successes included the Chancellor dismissing the spectre of a Financial Transactions Tax (FTT), continuing to support reform of the planning system and moves to kick-start house building and mortgage lending – all of which the BPF has been encouraging the government to deliver.
While the National Infrastructure Plan, which supports the creation of 35 road and rail projects, was welcome, the BPF was left frustrated with government missing an opportunity to unleash enterprise zones to go for growth.
As things stand, the zones are unlikely to attract developers to build within them without extending the capital allowances on offer. With many of the zones currently being empty plots of land, the need to incentivise developers to build is great.
Liz Peace, BPF’s chief executive, said: “Given the financial climate, there were never going to be mass handouts and tax cuts in the Autumn Statement. That being said, there were several announcements that the property industry will want to throw its weight behind and support.
“Confirmation that the UK will not bow to EU pressure and implement a financial transactions tax is a welcome boon for the property industry, which unfairly found itself within its scope.
“Some issues remain a work in progress – with many enterprise zones comprising empty plots of land, the government will need to consider how it plans to encourage developers to move in and build the buildings the new businesses will occupy. One way of attracting developers would be to allow them to claim capital allowances on development costs.
“Business rates remain a bone of contention. While we welcome the help being given to small businesses, and particularly retailers, it is disappointing that this has not been extended to those businesses and landlords who own empty shops, or indeed other business premises. Taxing empty property continues to suck investment out of our towns and cities."
Chancellor George Osborne has confirmed widely trailed plans for the one-year holiday on business rates for small businesses – due to expire in October 2012 – to be extended for a further six months at an estimated cost to the Treasury of £210m.
Osborne believes 500,000 companies will benefit from the tax break, with 330,000 not paying any business rates in 2012-13.
The holiday offers 100% relief on business rates up to £6,000, with progressively smaller rebates on amounts up to a cap of £12,000.
The Chancellor says that this will mean a third of all shops will have no business rates liability until April 2013.
Liz Peace said: "While it is very welcome that small businesses and particularly retailers can be helped in this way it is disappointing that this has not been extended to those businesses and landlords who own empty shops, or indeed other business premises.
"Taxing empty property continues to suck investment out of our towns and cities."
www.bpf.org.uk
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‘Plan A Plus, in all but name’ – CBI:
John Cridland, CBI Director-General, said: “This autumn statement works with the realities of today and provides an imaginative framework for UK businesses as it strives to secure growth and jobs. This is ‘Plan A plus’, in all but name.
“The downgraded forecasts and outlook were no surprise, but the Eurozone crisis is still hanging over us. The Government’s dogged commitment to budget deficit reduction remains the only way to maintain the UK’s triple A credit rating and low interest rates on international money markets.”
Cridland added:
On the economy:
"Given the continued uncertainty in the Eurozone, the downgrades to the UK’s economic forecasts reflect the current difficulties. Growth will stall through the winter and economic conditions will be weak for some time.
“With spending plans unchanged over the period of the parliament, the Chancellor is sticking to Plan A, and we welcome the reallocation of spending on infrastructure.
“Debt will peak at a higher level than previously thought, but will still be declining by the end of the parliament. The Government is still able to meet both fiscal rules and protect credibility in sovereign debt markets, which is so critical to private sector confidence.”
On infrastructure:
“Investing in our infrastructure will act as a stimulus to growth. The projects announced will not just boost immediate activity and jobs, but a longer-term infrastructure plan will support our construction sector in the years to come.
“We’ve called for new forms of investment to attract up to £200 billion into the UK’s infrastructure in the next five years. Making it easier for pension funds to invest in UK infrastructure is a great idea, but we need to get the detail right.”
On support for medium-sized firms:
“We are delighted that our campaign to gain support for medium-sized businesses has been heeded and we warmly welcome the Business Finance Partnership and measures to support exports.
“Having a strong mid-sized sector is vital for the long-term health of the economy. The Chancellor’s announcements mark the first step in turning mid-sized firms into a new engine for growth, worth up to £20bn by 2020.
“The £1bn Business Finance Partnership is an innovative approach to providing mid-sized firms with a broader range of long-term finance options.
“Additional funds to provide targeted help for mid-sized firms to export could boost their ability to do business overseas.”
On credit easing:
“The National Loan Guarantee scheme is a necessary pre-emptive strike to safeguard bank lending to SMEs. With the pressure on bank balance sheets, this practical and immediate help should bolster business confidence.”
On measures to support energy-intensive industries (EIIs):
“The Government has recognised that the UK’s energy-intensive users need help, as a result of the unilateral increases in manufacturing energy costs from the carbon floor price and electricity market reform. We now need to understand how this money will be allocated to those most at risk.
“It’s vital we keep industries in the UK which produce the steel that goes into wind turbines, the lubrication that helps their blades turn and the cement that makes their foundations.
“It’s good that the Government has committed to review the impact of its electricity market reforms on energy-intensive firms. Ensuring these industries are included in future energy policy is an important part of the UK continuing to lead the rest of the world on climate change.”
On aviation policy, CBI said:
“We have ambitions to build the UK’s export capability and without a world-class hub airport in the South East to service the needs of travellers to all emerging market destinations, this cannot happen. UK businesses will be relieved that the Government has come off the fence on this issue. All options should be closely examined and an informed decision needs to be made as soon as possible.”
On housing:
“Unfreezing the housing market is an important step on the confidence-building ladder. Mortgage indemnity guarantees are the best way to bridge the deposit gap for first-time buyers.
“By encouraging mortgage lenders to offer higher loan-to-value mortgages, the mortgage indemnity guarantee scheme will insure them against their losses if borrowers fail to repay their loans.”
On employment law reform:
“The Government’s employment law review is a move in the right direction and should give firms confidence to take on more staff. Businesses up and down the country will welcome changes to employment tribunals but will be looking for tangible evidence of change sooner rather than later.”
On enterprise and innovation:
“The commitment to introduce an above-the-line research and development (R&D) tax credit will have a positive impact on the attractiveness of the UK as a place to invest.
“Extension of the successful Regional Growth Fund by a further £1bn will encourage business investment and create new jobs, particularly in manufacturing.
“The Government has taken a welcome step in introducing 100% capital allowances in selected Enterprise Zones.
“The additional £75m to help small businesses demonstrate new technologies will help firms to commercialise their ideas.
“Extending the Enterprise Finance Guarantee limit will increase the number of medium-sized firms able to benefit.
“The new Seed Enterprise Investment Scheme will provide an alternative to bank lending for higher-risk start-up companies.”
On pay and pensions
“In the light of weak growth, further restraint on pay awards in the public sector is a tough but necessary step.
“In the longer-term, it is essential that pay reflects local labour markets. The Chancellor is right to ask the pay review bodies to explore how this could be done.
On bank levy:
“Banks must play their part in restoring the public finances, but like any other business they need certainty to help them plan with confidence.”
On business rates:
“Continued business rate relief for smaller firms is another measure that will help drive growth.”
On fuel duty:
“The cut to the increase in fuel duty will be welcomed by businesses and motorists alike at a time when fuel costs are a real burden.”
On the Green Deal:
“The Green Deal should be a win-win, by providing a real boost for manufacturers, installers, and retailers, while helping people save on their energy bills. The Government is right to heed the CBI’s call for incentives, and we should ensure that this money is used to help kick-start the market.”
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Chancellor’s Autumn Statement “provides little comfort to construction firms” – Scottish Building Federation:
Commenting on the UK Treasury’s Autumn Statement, announced by the Chancellor of the Exchequer, Scottish Building Federation Chief Executive Michael Levack said:
“Coinciding with new statistics also published today, showing the number of new homes built in Scotland fell by 12% between April and June this year compared to the second quarter of 2010, the Chancellor’s autumn statement provides little comfort to construction firms that the economic environment is likely to improve any time soon.
“Last week, leading industry bodies set out a clear plan to unlock growth in the UK construction industry. While the Chancellor’s statement puts forward interesting plans to boost capital investment in certain areas, there are other important priorities highlighted by the industry which have been ignored – not least our ongoing request for a targeted cut in VAT on home improvements to kick-start job opportunities in the industry and green our built environment.
“Breathing life back into private sector construction must be a top priority as we try to build a sustainable economic recovery. I hope the Scottish Government will take the opportunity – and be given the freedom – to prioritise any additional funding for capital projects released through Barnett consequentials to kick-start projects that are shovel-ready but currently stalled due to a lack of bank finance.”
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‘SME House Builders and First Time Buyers are the Key to Economic Growth’, says Federation of Master Builders (FMB):
The Government could have gone further to help small and medium sized enterprises (SMEs) and first time buyers to get the economy back on the road to sustained economic growth, says the Federation of Master Builders (FMB) in response to today’s Autumn Statement from the Chancellor of the Exchequer.
Brian Berry, FMB Director of External Affairs said:
“The Government is in a very tight financial position but there are a number of measures that the Chancellor could have taken today which would have had significant economic benefits for little, if any direct cost, by extending existing policies and delaying the introduction of others.”
“In addition to making more credit available at reasonable rates, as they have already committed to doing, the Government should have extended the stamp duty holiday for first time buyers for property transactions under £250,000, which expires in April, to help get the housing market moving again.
“It could also have reduced the burdens on SME house builders by providing a blanket exemption from the soon to be implemented Community Infrastructure Levy, which will add around £43,000 to the cost of a building a two bedroom house in some parts of the country. The Government also missed an opportunity to delay implementation of its ‘zero carbon homes’ policy until the housing market has recovered sufficiently to support the extra costs.
SMEs are the engine of growth but are likely to be excluded from the wider specific aid packages aimed at the industry. Adjusting these policies will do more to help small house builders who in return will deliver much needed jobs and homes.”
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Details too vague to support announcement just yet, Cluttons
James Gray, Head of Project and building consultancy division, Cluttons, commenting on the announcement that billions is to be ploughed into construction and infrastructure to help boost the economy, said:
“Construction has traditionally been one of the largest contributors to the UK economy and, as a result, was one of the biggest casualties when the recession saw building work ground to a halt.
However, even prior to the downturn, lack of investment in major infrastructure projects has seen the UK fall slowly behind the likes of China and the Middle East, which are now being called upon to fund the projects we desperately need to progress.
When this is considered alongside the ailing public sector pipeline and the country’s housing crisis, it becomes clear just how much support our construction industry needs.
“The Chancellor’s announcement will be welcomed widely, but clarification is needed. Housebuilders are apparently to benefit, however how does the highly topical NPPF affect this?
Local authorities are still unsure of where they stand. We also need more information on the ‘priority projects’ which will benefit from the funding injection – where and what will these be? Hopefully this announcement will ultimately create jobs for the industry and support the growth of the UK economy, however it is too early and the details too vague to support fully the announcement just yet.”
Peter Chapman, head of rating and compensation at Cluttons, commented on the announcement that small businesses will benefit from business rates relief:
“Of course additional help for small businesses is to be welcomed, however the unfortunate truth is that this is too little, too late. The extended business rates relief will no doubt help some small companies weather the economic storm, but whether it will make any significant impact on the UK’s financial state is doubtful. Many of the small businesses which would have benefited from the support earlier are no longer sustainable: this move is simply not enough to save them.
“These measures are said to part of a wider aim to improve the financing and taxation environment for small businesses, but encouraging more start-up companies will not stave off a double-dip recession. We also need to ask why larger businesses are being ignored? These, too, drive the economy and are not receiving the support they desperately need.
“It is essential that George Osborne recognises and takes the opportunity to abolish the current increase of the uniform business rates linked to the RPI figure and uses the CPI figure instead. Going forward, we would urge the Chancellor to look at the bigger picture and refocus his efforts on those businesses which can help the UK economy grow.”
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Comments from GL Hearn in relation to Business Rates:
The Chancellor’s Autumn Statement made two new announcements on Business Rates. The most significant of these is the announcement of deferral of 60% of the RPI increase in 2012/13 business rates until 2013/14 and 2014/15.
Overview
- • Two new Business Rates announcements in Autumn Statement
- • Very disappointing for Ratepayers in current challenging economic environment
- • UBR Link to RPI inflation figure unfair to ratepayers
- • Option to defer part of RPI Increase in rates welcome but costs not reduced and further increases complexity
- • Small Business Rates “Holiday” extended for a further six months
Blake Penfold, Business Rates Director for GL Hearn, comments:
“This will be very disappointing to business ratepayers who were hoping for a clear announcement of an increase in the Uniform Business Rate (UBR) at a figure below the September RPI figure of 5.6%. We had hoped for a clear-cut reduction in the level of UBR increase. Instead we have a reworking of the deferral scheme first introduced in 2009.”
On the apparent confirmation of the UBR link to RPI Inflation (but with the option to defer payment of 60% of that increase until 2013/14 and 2014/15)…
“Business rate bills each year are calculated by multiplying the rateable value by the multiplier, which is uprated in line with RPI inflation each year. The RPI
inflation figure for the previous September is used and in September 2011, RPI reached 5.6%.
Despite current economic circumstances the Chancellor appears to confirm that the UBR for 2012/13 will increase by 5.6%. Despite lobbying by us and others that the UBR increase should be below the level of RPI, the Chancellor appears to say that the full RPI increase will be set but that business will be offered the option to defer 60% of the RPI increase in rates and spread the payment of this deferred amount over 2013/14 and 2014/15.
“It is very disappointing in the current economic situation that the Government has not responded to calls to freeze the 2012/13 UBR increase or at least to reduce it below the full RPI increase of 5.6%.
The announcement allowing deferment of payment of part of the increase is welcome but the assistance is limited as the full increase will still have to be paid in 2013/14 and 2014/15 in addition to normal rates. This is little more than a rehash of the previous deferral scheme from 2009.
The Regulations to implement the deferral option were highly complex and most local authorities found the scheme very difficult to administer.
Additionally, it appears that the deferral will apply only to the RPI increase in rates payable (see Para 1.120 of the Autumn Statement) and not to any increase resulting from Transitional Adjustments. Whilst the deferral is welcome, it would have been preferable to see a straightforward reduction in the level of UBR increase.
The Chancellor has also missed an opportunity to look at empty property rate relief. It remains to be seen whether the Scottish Government will come forward with a similar deferral scheme as it did in 2009.”
On the extension of small business rates relief…
“The Government is also extending its scheme of additional small business rates relief for a further 6 months. The original; scheme applied relief of 50% for properties with RV below £6,000 and lower relief for properties with RV below £12,000.
The relief under this scheme was temporarily doubled, giving an effective rates “holiday” below £6,000 for the period to 1st October 2011. The Chancellor’s statement refers to a six-month extension of this doubling. This would mean the double relief applies until 31st March 2012. (There appears to be a typographical error in the printed version of the Statement as this refers to relief for a further 6 months from October 2012).
“This extension of the period during which small businesses can claim double the amount of Small Business Rate Relief will be welcome to the SME sector. It does appear to be at odds with the Government’s treatment of larger business as set out above. Whilst welcome, it remains to be seen how effective this measure will be in supporting small businesses.”
On the increasing complexity of business rates…
“Rates are a major outgoing to businesses but have become increasingly complex to understand and accurately calculate. The latest Government announcement offering the option to defer part of the increase in rates for 2012/13 until 2013/14 and 2014/15 increases still further the complexity of administering rates and keeping costs under control.
There is now a wide raft of supplements and adjustments which impact on most ratepayers’ liability including transitional adjustments, the Small Business UBR Supplement, Business Improvement District (BID) Levies, The City of London UBR supplement, and Business Rates Supplements as well as proposed additional levies in Scotland and Northern Ireland.”
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Airline CEO’s respond to the Chancellor’s Autumn Statement
Responding to the Chancellor’s Autumn Statement, Carolyn McCall from easyJet, Willie Walsh from IAG, Michael O'Leary from Ryanair and Steve Ridgway from Virgin Atlantic jointly said:
“In the cause of UK economic recovery, Air Passenger Duty (APD) is an own goal - and the Chancellor has just scored another one. By increasing this tax by double the rate of inflation, he is further deterring inbound tourism and foreign investment, and choking off yet more job opportunities for young people.
APD has no international parallel and has already cost the UK economy 25,000 jobs - that is what the Government should focus on.
We call for the Chancellor to commission an independent study of APD's overall economic value. We have no doubt this would confirm that APD's negative impact on UK GDP significantly outweighs its revenue benefit for the Treasury.
This tax must be abolished.”
