Economic Overview - Walter Boettcher, Colliers’ Head of Research and Chief Economist
“Aside from the obvious missed opportunity of tackling head-on the business rates burden, the announcement that corporation tax is set to rise to 25% in April 2023, will see UK plc breathe a collective sigh of relief, given tapering and transition periods. At 25%, the rate is still competitive compared to the other G7 members.
“The capital gains tax was not raised, but like income tax, inheritance tax and pensions allowance, the tax thresholds have been frozen through 2025-26, with the VAT registration threshold frozen through 2023-24. The new capital allowances, including a 130% ‘super deduction’ on plant & machinery investments, coupled with an extension of loss carry back to three years, demonstrates that the Chancellor’s contention is justified, this budget supports an ‘investment-led’ recovery.
“A real ‘rabbit out of the hat’ moment was the announcement of the new National Infrastructure Bank in Leeds with £12 billion in capitalisation to support a ‘green industrial revolution’ and one of the only measures not to be leaked.
“Likewise, the announcement of a new HM Treasury campus in Darlington and eight freeports dotted across the country supports the idea that, for once, the Budget was not about London. In fact, London was only ‘name-checked’ once in the 107-page budget report; and only in connection with promoting the capital as a leading venue for global voluntary carbon markets for high-quality offsets.
“In short, worries about missteps in the budget undermining business confidence at a crucial moment in the UK recovery were proven unfounded. For UK real estate, residential and commercial, there was much to be optimistic about, not least of which, the further timely support for the housing market and steps that should improve business sentiment and break the logjam in business expansion.”
“There will be a big sigh of relief on the extension of the business rates holiday and it will provide help for many businesses for almost another 12 months. However, the £2 million cap per business will mean the relief after June will be very limited for many of the larger occupiers. The announcement of the £5 billion Restart Grant fund sounds large but actually only equates to about four days of total retail and hospitality spend in the UK. The industry is too large to ever make an adequate package of support work.
“The bottom line is that businesses need to be able to reopen sooner and there is a balance that can be struck between public health and the economy in order to create a safe opening of the retail sector. At the moment this cautious approach isn’t helping the many businesses that have spent the last year with very little opportunity to trade normally.”
“The schemes that have been announced today will be a welcome relief for the sector, but the only thing that will really make a difference is to allow pubs, restaurants, hotels, gyms and nightclubs to reopen again, this time without the curfew and other unnecessary restrictions.
“The extension of furlough, the VAT reduction, business rates holiday and further business grants will help to plug the gap while they’re unable operate, but nothing will bring confidence back to the market like opening the doors and welcoming customers back in to a COVID-safe environment.
“To be fair the Chancellor has done the right thing, and it seems he’s doing everything in his power to support the economy. However, it’s the over cautious measures that are being taken to unlock the country that will have the biggest impact on our recovery and determine whether businesses will be able to survive long enough to reopen at all.
“It’s clear from the latest evidence that the vaccine is working, and I urge the government not to delay any further on their reopening plans.”
Residential - Andrew White, Colliers’ Head of Residential
“The stamp duty holiday helped to keep the housing market moving during a period of uncertainty for the UK economy. Extending the holiday until the end of June is right and fair for people who have deals agreed already and have been delayed by the long legal processes, and to prevent these deals falling through. It’s also good that there will be a staged return to the normal level in October.
“However, it’s disappointing that the duty is in place at all. It would have been better if it was scrapped for properties worth under £500,000 permanently and a higher tax was instead applied to super prime properties.
“One of the unintended consequences of the stamp duty holiday has been it has unlocked more buy to let purchases, which had been dampened by the previous three per cent levy added on to the tax. While this pushes up house prices, and reduces their affordability, it also provides the government with further tax opportunities.
“However the new mortgage guarantee scheme will assist those who are able to raise only a small deposit to finally get onto the housing ladder, especially for first time buyers who are no longer able to utilise the Help to Buy scheme.”
Sustainability - Andres Guzman, Colliers’ Head of Sustainability
“The Chancellor made few new announcements on the environmental agenda today, instead repeating the Prime Minister’s commitments around green gilts and a national savings scheme. However, there were some glimmers of what I hope will be the green shoots of more to come, quickly.
“The new UK Infrastructure Bank in Leeds is expected to promote economic growth alongside tackling climate change, two areas that need to become more aligned if we’re to reach our net zero goals. The three schemes mentioned today towards the end of the statement the hydrogen hub and Global Centre for Rail Excellence in Wales and the new wind farms in Humberside, chimed with that collaboration needed.
“Establishing a carbon market in the city of London is also step in the right direction showcasing our desire to be leading the way as a nation. However, we do need to see more focussed interventions which will have real world impacts sooner rather than later. It would have been good to have heard more about funding and initiatives for retrofitting our current building stock, seen as the Green Homes Grant pot has been reduced. There’s a lot that can be done now, which will help us to meet our net zero targets of the future. An opportunity to ignite our economy now and protect our planet for the future has been missed.”
“We have effectively got a Freeport in each region, which supports the government’s ‘levelling-up’ agenda. The apparent favouring of the Teesside bid over the North East was not surprising given the geographical proximity however it was unexpected that there was no mention of the ambitious bid for a Great Western Freeport based around Bristol Port, the most centrally-located deep water port in the UK. As the Government has said it is seeking to grant Freeport status to 10 ports across the UK, perhaps the Great Western Freeport bid will be successful at a later date, given the enormous opportunities this could bring to the region by creating an estimated 50,000 direct jobs and a further 30,000 in the supply chain.
“The Freeports programme will provide an excellent opportunity for companies to invest in new buildings and manufacturing units, which are all necessary for a modern economy. The simpler planning, cheaper customs (with favourable tariffs, VAT or duties), and lower taxes will all be well received and go a long way towards encouraging construction, private investment and job creation.”
Birmingham - James Cubitt, Colliers’ Head of Birmingham Office
“Whilst the Midlands did not see the levels of economic stimulus granted to northern regions there are a lot of positive to take from this budget. The decision to reopen a number old railways stations and lines is something that our Metropolitan Mayor has been requesting for a while and this will improve connectivity to areas that are not currently well served
“I was also particularly pleased to see more than £116 million pledged to regenerate town centres in our region. I grew up in Nuneaton and it saddens me to see how the town centre is struggling. The £23.5 million regeneration grant for Nuneaton may not solve all its problems but it will certainly do a lot to help.”
“The Chancellor’s stated aim of ‘redrawing the economic map’ is very welcome, but unfortunately this budget lacked significant measures to achieve this aim in the South West.
“The announcement of Plymouth and The Solent as locations designated for two of eight new freeports was good to see, as was the inclusion of Swindon and Bournemouth among 45 towns to share £1 billion of funding from a new Towns Deals fund for levelling up.
“However, the bulk of support in the budget was focused on the north of England, and it was disappointing that the eight freeport sites announced did not include the ambitious bid for a Great Western Freeport based around Bristol Port, the most centrally-located deep water port in the UK.”
Leeds - Ben Hall, Colliers’ Head of Leeds office
“It is really refreshing to receive so much positive investment into our region, with Yorkshire and the North East being right at the centre of the Government's levelling-up’ agenda.
“The proposed Freeports on the east coast could be a real game-changer for their respective local economies. This, along with the north shoring to Darlington and the National Infrastructure Bank in Leeds, will bring enhanced inward investment and job creation to the North. What we need to see now is these announcements built upon. If we see action along with much-needed infrastructure investment, the future will be bright!
Manchester - Dominic Pozzoni, Colliers’ Head of Manchester office
“The confirmation of eight new Freeports in the regions, including Liverpool, will act as a real boost to local and regional economies. This, coupled with the announcement that Leeds will be home to the first ever UK Infrastructure Bank, with £12 billion to invest in projects across the UK, is another positive signpost that the Government is delivering on its ‘levelling-up’ agenda and committing to reaching net carbon zero by 2050.
“All in all it was a positive budget for the regions and if followed through appropriately the Chancellor’s announcement will go a long way in supporting regional economic recovery and restoring business confidence post-pandemic.”
Regional Overview – Walter Boettcher, Colliers’ Head of Research and Chief Economist
“The Chancellor’s contention that this was a budget to support an investment-led recovery is supported by numerous measures to break the logjam of business uncertainty and renewed investment.
“In looking through the 33 regional projects detailed on page 56 of the Budget 2021 Report, the targeting goes beyond the relatively new local combined authorities and includes Growth Deals in Northern Ireland, Scotland and Wales. The evidence suggests that the Government is seeking to begin delivering on its election manifesto of ‘levelling up’ despite severe constraints on the public purse.
“Of fundamental importance will be the role of private capital in achieving government aims. In this respect, worries about missteps in the budget undermining business confidence at a crucial moment in the UK recovery proved unfounded.
“For UK real estate, residential and commercial, there was much to be optimistic about given new housing market stimulus and only a modest change to capital gains through freezing the allowance threshold, but the key budget support looks to be linked to supporting the fledgling recovery in business confidence.”