Today’s Spring Statement by Chancellor Rishi Sunak was focused on addressing rising cost of living and ongoing energy crisis currently affecting households across the UK and whetting the appetite of UK business for changes to come in autumn.
As expected, the Office for Budget Responsibility (OBR) has revised down economic growth forecasts. UK GDP is now expected to grow by 3.8 per cent in 2022 (previous forecast: 6.0 per cent) and 1.8 per cent in 2023 (prev.: 2.1 per cent) as rising inflation will slow consumer spending. Inflation is now predicted to average 7.4 per cent in 2022 (prev.: 4.0 per cent) and will not fall back below the Bank of England’s 2 per cent target until 2024. The Bank of England itself has recently said it expected inflation to peak at 8 per cent this year. While Capital Economics and Oxford Economics predict a peak of 8.4 per cent and 8.5 per cent, respectively.
“The Chancellor’s Spring Statement had little to offer for commercial property directly other than a comforting sense of confidence and competence in budgetary matters,” said Walter Boettcher, Head of Research & Economics.“The Chancellor offered emergency support for households squeezed by inflation and a nod to the green agenda was welcome. If there was disappointment, it was related to the suggestion that revisitation of research and development incentives would not occur until the Autumn Budget.”
Some of the measures targeted at cushioning the impact of the cost-of-living crisis include:
- A 5p cut to fuel duty, coming into effect at 6pm today.
- An increase in the threshold for paying National Insurance by £3,000, saving a typical employee around £330 per year.
- Doubling in the size of the Household Support Fund to support vulnerable households to £1 billion.
In recent weeks, the Government had already announced a £150 non-repayable rebate for households in England in council tax bands A to D, a £200 energy bill loan and an increase in the National Living Wage from £8.91 an hour to £9.50 from April.
Oliver Kolodseike, Head of Economic Research, said: “We welcome the announcement of VAT relief on residential repairs and maintenance to encourage people to improve the energy efficiency of their home. With energy prices skyrocketing and the Government committing to net zero by 2050, this is a further step in the right direction. The Chancellor pointed out that a typical family having roof top solar panels installed will save more than £1,000 in total on installation, and then £300 annually on their energy bills. The changes will take effect from April 2022. However, more needs to be done for the Government to achieve its commitments outlined in the Net Zero Strategy: Build Back Greener paper, published last October.”
James Pay, Head of Client Sustainability, said: “This statement shows the importance of remembering that sustainability is not just about the reduction of carbon emissions to meet the Net Zero 2050 target. It needs to support a sustainable future/development for all social and economic groups as reflected by the (carbon counter-intuitive) temporary fuel duty cut and the business rates relief for SMEs. The mooted development of minimum efficiency standards for the private rental sector are welcomed but their confirmation and implementation needs to arrive faster. While, the time-limited VAT zero rate for the installation of ESMs will hopefully provide impetuous to this much needed retrofitting of homes. However is the time limit long enough to take in to account any supply chain issues that could be exacerbated by a rush for "green" brought on by this cut?”
John Webber, Head of Rating, added: “It was disappointing that the ‘elephant in the room’, business rates was largely ignored, despite the impact that ultra-high rates bills has had on businesses in recent years. Retailers and other high street operators will be now considering their business plans for next year and looking closely at their future business rates liabilities, particularly when the Covid-related reliefs come to an end. It is essential the Chancellor provides reassurance that rates bills next year will immediately reflect the lower rents we are seeing in the market now - providing incentives for businesses to keep or expand space and for property investors to invest in the sector across the UK.
“Without this reassurance the government’s levelling up agenda will be meaningless. And the high street unlikely to get back on its feet. We are disappointed the Chancellor was not more forthright in his Statement today.”
