Chancellor Jeremy Hunt today announced measures to increase productivity to boost the economy in his spring statement with £21.9bn of giveaways, equivalent to 0.8% of GDP.
However, industry commentators accused Hunt of ignoring housing reform and the rental sector. He was also criticised for the lack of support for first time buyers as the help to buy scheme is scheduled to come to an end on 31 March 2023.
Michael Cook, group managing director of Leaders Romans Group, said: “For a budget intended to reverse the economic slowdown and the cost of living – in the chancellor’s words, ‘a budget for growth, long-term sustainable growth’, this only scratched the surface, providing little help for those unable to afford to rent or buy. The property industry had hoped for so much more.”
The budget also failed to update VAT policy, which remains punitive to retrofitting residential real estate versus building new developments, and the chancellor ignored widespread calls to reintroduce tax-free shopping for international visitors.
John Webber, head of business rates, Colliers, said the government had again failed to fulfil its manifesto and cut business rates. He said failure to freeze the multiplier for next year means businesses are likely to see a 5% increase in business rates bills in April 2024.
However, the chancellor did announce some local authorities would be able to retain their business rates revenues and decide how they would be used. He also announced the creation of 12 new low-tax regional investment zones in Manchester, Glasgow and the Midlands. With £80m of funding over five years, it is hoped the new zones will trigger investment in infrastructure and housebuilding projects in the regions.
Industry reaction
Vivienne King
Chair of the Shopkeepers’ Campaign
Failing to cut business rates amounts to a broken promise and a kick in the face for bricks and mortar retail. We were disappointed the consultation on the reform of empty property business rates relief, that the government has promised it will carry out, was not launched today.
We will continue to make the case for empty property relief to be extended to 12 months, to provide time for properties to be upgraded in line with upcoming minimum energy efficiency performance changes and to be re-let. [But] we welcome the consultation on disclosing more information on business rates valuations.
John Webber
Head of business rates, Colliers
The government’s lack of comment on business rates in its budget today is desperately disappointing – with no reassurance that it has engaged with the industry, despite the new 2023 revaluation list becoming live in two weeks’ time.
We still need is a well-managed, and transparent, business rates system, that encourages rather than punishes businesses. The lack of decisive action is desperately disappointing and will have wider implications for the overall property markets.
Brendan Geraghty
Chief executive officer, UKAA
The build to rent sector has a key role to play in addressing the housing shortage in the UK. However, the biggest obstacle to delivering these homes is the planning system.
On-going delays to planning exacerbated by changed to the NPPF has led to 50 local authorities pausing or reducing local housing development plans, meaning delays and uncertainty for investment in BTR.
The budget [also] does not address the impacting supply of much-needed high quality homes for rent. Since 2019, a total of 70,000 buy-to-let landlords have left the housing market, representing a loss of 116,000 properties.
It is encouraging that focus continues on levelling up, with the announcement of 12 investment zones. BTR is central to regeneration and meeting housing need in key regional cities.
Nicola Gooch
Planning partner, Irwin Mitchell
The biggest news in the budget for planning was the promise of additional help in tackling nutrient neutrality issues throughout England and, in particular, to provide funding for local nutrient neutrality schemes.
Whether local nutrient neutrality schemes will be able to help, will in part depend on how quickly Councils are able to get them up and running – but given that the HBF estimates that nutrient neutrality rules are currently holding up the development of at least 120,000 new homes, anything that can help ease the situation is to be welcomed- particularly as the proposals in LURB to force water companies to tackle pollution at source are not likely to become effective until 2030.
William Scoular
Head of private client lending, Investec Real Estate
Despite calls from the wider industry getting increasingly loud, it’s disappointing that another budget announcement has come and gone without the government addressing the highly punitive VAT policy that discourages retrofitting residential property over building new developments.
The government’s net zero ambitions will not be met without existing real estate being modernised and this is unlikely to happen at the required volume while these financial barriers remain in place. Repurposing is already often more expensive than new developments, so the government should be trying to alleviate those costs and make it more attractive, given the environmental benefits of the carbon savings associated with these projects.
Nick Sanderson
CEO, Audley Group
Another opportunity for housing reform has sailed by. An innovative chancellor would have set out reforms that place as much emphasis on later living as first-time buyers. It was unrealistic to expect a stamp duty holiday in the current economic climate, but Hunt should have considered stamp duty reform.
In its current guise it’s a brake to the whole market, which in the long term costs the Treasury more. If there is no fluidity, people stay in family homes that are too big and unsuitable for them. Unsuitable housing leads in turn to more pressure on a stretched NHS compared to a pre-emptive move to a property that can adapt as people age. And yet more housing is needed for first time buyers at a time when there is already a serious deficit.
In contrast there is a desperate need to increase the provision of age specific housing in the UK, but the sector has been largely ignored by successive chancellors. There is little time to waste. The groundwork must start now, if we are to see any benefit in the next few years.
Kay Buxton
Chief executive, Marble Arch London BID
Shopping accounts for 46% of all tourist spending, with 54% being spent on hotels, eating out, and visitor attractions so it is frustrating that the chancellor has again ignored widespread calls to reintroduce tax-free shopping for international visitors.
Independent research suggests that reintroducing tax-free shopping would have led to an extra £2.1bn being spent on shopping by overseas visitors, as well as £1bn on hotels, restaurants, and visitor attractions.
The removal of tax-free shopping has damaged the international appeal of the UK for visitors, so this is another missed opportunity by the chancellor, which would have provided a much-welcomed boost for the UK visitor economy.
Joshua Bond
Founder and managing director, Bond Land
The budget speaks to growth, but any prospect of it and the investment zones the government has set out is practically impossible without taking a sledgehammer to the planning system.
The broader needs of the nation rely on changes to regulations, which allow for more land to be made available and for what we build and deliver to flex to meet the requirements of a modern society.
Ben Woolman
Director, Woolbro Group
The bewildering absence of support for first-time buyers and the property sector is a catastrophic misstep for the Tories which could cost them in the next general election.
The government is fully aware that it is more difficult than ever to get onto the property ladder, yet its inaction is paving the way for a potentially devastating defeat at the next general election — and the opposition knows this.
An obvious and overdue starting point is to replace the help to buy scheme, which helped hundreds of thousands of first-time buyers onto the property ladder.
Secondly, it must renege on plans to make housing targets for advisory only, ensuring that underperforming planning authorities are held to account when they fail to hit targets. Lastly, and most importantly, it must bring planning reform back onto the table.
Olivia Harris
CEX, Dolphin Living
The chancellor is right to focus on increasing productivity as a means of boosting economic growth, and we welcome the support around more affordable childcare as part of that. However, this focus must also include tackling one of the critical areas holding back productivity in areas such as London and other expensive parts of the UK.
Namely the high cost of housing and how that is having a significant detrimental impact upon the ability to attract and retain key sector workers across both public and private sectors.
This is especially the case in London where those workers who literally keep the city running are being priced out and can no longer afford to rent here. This is having a huge economic as well as social impact. As a response the government needs to commit to a productivity partnership with housing providers to deliver at scale discount to market rented housing to address this critical need.
Clive Docwra
Managing director, McBains
With the government stalling on major projects such as HS2 and reducing levelling up spend, the creation of 12 new investment zones will hopefully trigger investment in infrastructure and housebuilding projects in these regions.
On tax, housebuilding could have been given a further boost by reforming stamp duty on zero-carbon housing – if that was abolished then developers would not only start building more homes, but greener ones at that.
We’d have also liked to have seen tax breaks for investment funds dedicated to financing green construction projects. More positive was the announcement on ‘full expensing’, which will mean the money a construction firm invests in IT equipment, plant or machinery can be deducted in full from taxable profits.
Gabriela Hersham
CEO and co-founder, Huckletree
The success of the new investment zones will depend on the details, but it’s welcome that the government is finally following the private sector’s lead. Companies like ours have already expanded to meet demand, doubling down on Manchester’s strengths; a thriving skills base with a world-class university and a strong creative cluster.
The new zones should prioritise future-proofing the economy, supporting the next wave of transformative companies like Depop and Engine Transformation that are transforming media and digital lifestyle
Josie Parsons
CEX, Local Space
While we welcome the support measures put in place by the chancellor especially in relation to energy bills and affordable childcare, with shock new data from London councils claiming that one child in every classroom in London is living without permanent and suitable accommodation, we believe that the government needs to go much further in terms of supporting the affordable housing sector to address this challenge.
The shortage of social housing and suitable temporary housing is not only having a hugely detrimental impact upon people’s lives, it is also now also starting to hold back the economy as people struggle to find suitable housing close to where they work.
It is absolutely imperative that the government acts and starts to increase the supply of all types of affordable housing to not only improve lives, but also drive productivity.
Marc Vlessing
CEO, Pocket Living
While we broadly welcome the support measures announced by the chancellor to help stimulate economic growth and further mitigate the impact of the cost-of-living crisis, one area where the government does need to go much further on is the support for those aged 25-45 years old who feel increasingly locked out of the housing market.
With the effective end of help to buy at the end of this month, we need a new, bold, package of measures to both increase the supply of new affordable housing and support first time-buyers onto the property ladder.
Small sites should form the foundations of any flourishing housing sector and through simple changes to policy, the government can not only support greater housing delivery, but also deliver on its levelling up agenda, at no extra cost to the treasury.
Avinav Nigam
Cco-founder and CIO, IMMO
Any commitment to helping those in the rental sector remains curiously absent from the government’s announcements, as does support for improvements to housing stock to meet climate targets.
Trends point to the proportion of those renting continuing to grow as interest rates continue to rise, while housing delivery stagnates, and existing stock remains unaffordable. A focus on homeownership must be matched by a focus high-quality, affordable rental homes – only possible through encouraging the kind of institutional investment in the sector that can refurbish the UK’s notoriously leaky, ageing housing stock.
Mary-Anne Bowring
Group MD, Ringley Group
In stark contrast to last year’s mini-budget, today made clear that government is intent on restoring confidence in the markets. Though thin on the ground when it comes to housing commitments, the stability signalled today is a positive development for real estate investors targeting the UK, who will be relieved there were no rabbits out the hat.
The reality is that we are still recovering from the Kwarteng and Truss car crash but investors and lenders, especially in the living sectors, are increasingly seeing the UK through a lens of optimism.
Jonathan Hale
Head of ESG consulting, Knight Frank.
It is disappointing that today’s budget lacked more meaningful measures to support business addressing the urgent needs of the planet. Real estate companies are leading the charge in addressing the sector’s contribution to climate change but need the government to mitigate the associated risks and create more opportunities for positive impact.
The chancellor missed the opportunity today, for example, to introduce tax incentives for reducing embodied carbon in retrofit and refurbishment projects.
The government needs to rapidly accelerate its support for those on the path to net zero by creating a clearer framework of rules which work for all and which are connected to the cross-industry goal of reaching net zero by 2050
Dr David Crosthwaite
Head of consultancy services, BCIS
The announcement that five construction occupations will be placed on the shortage occupation list is a beacon of hope in an otherwise underwhelming spring budget, that lacks a clear industrial strategy to encourage construction investment and stimulate economic growth.
The announcement of measures to boost the number of Ukrainians entering the labour market and returnerships, targeted at the over 50s, will do little to replenish construction’s dwindling workforce. We need a more concerted approach that prioritises investment in apprenticeships and training, to tackle ingrained labour shortages.
BCIS welcomes the continued commitment to capital investment programmes. But the fact that many of these have been postponed – such as parts of HS2 and Lower Thames Crossing – will inevitably push up the price of these projects in the long term, due to their budgets being eroded by inflation.
The government’s commitment to public sector investment is encouraging and we look forward to the publication of the National Infrastructure and Construction Pipeline later this year, to see how much of the £600bn is invested in construction.
Stuart Grant
CEO, ARC
The value of R&D cannot be overstated. We’re delighted to see the government act in response to the many science and innovation-based companies that rely on the existence of the R&D tax credits scheme. It will help companies operating across deep tech and life sciences, to continue to attract and retain world leading talent and have the materials to develop the fundamentally important technologies required to make the UK a leader in the fields of science and innovation.
We want to continue to attract global companies to the UK to work side-by-side with the fast-growth ventures born here and the nascent businesses being spun out of our excellent academic institutions. It is that richness of companies, clustering together, that will deliver a model community capable of competing internationally. Following a week in which the chancellor also acted swiftly to support venture capital-backed start-ups affected by the collapse of Silicon Valley Bank, we can see this as well as the quantum computing strategy and AI Sandbox commitments as hugely positive moves in the right direction for our sector.
Emma Goodford
Head of life sciences and innovation, Knight Frank
It is encouraging to hear that the government remains focused on harnessing the UK’s leading science and technology capabilities to drive innovation and growth.
Today’s budget adds more detail to the government’s recent pledges on innovation funding. This aligns to the government’s levelling up ambition, but it remains unclear whether it recognises that accelerating innovation would be best served through the use of growth funds to improve the best-performing innovation clusters and ecosystems nationwide – particularly London. Established clusters would find additional focus even more advantageous if these measure could unlock a planning blockage.
September’s mini-budget damaged start-up and early-stage growth by cutting R&D tax credits. This has been partially reversed for the biotech sector, but the requirement for broader innovation clearly extends far beyond this. Therefore, today’s additional clarity around tax credits is a welcome step toward a more favourable approach to R&D within innovative sectors of the economy.
I am pleased to hear the government announce incentives for UK investors and pension funds to commit to early-stage companies, including tax breaks to encourage investment and the commitment that businesses will be able to offset 100% of investment in infrastructure and factory and machinery assets against profits for tax purposes. However, the UK must be alert to attracting international business from some of the world’s most populous countries, not just the US.
Further measures which quickly and effectively direct international interest, as well as the requisite funding, toward innovation hubs across the UK are needed, and it is welcome that such measures were hinted at by the chancellor today. To unlock the potential of the UK’s life sciences and innovation real estate sectors, this funding must be deployed efficiently, without the interference of excessive numbers of quangos and process-driven partner organisations.
Cllr John Merry
Chair of Key Cities and deputy city mayor, Salford City Council
We welcome the government’s ambition for a ‘devolution revolution’, and the introduction of two trailblazer deals and 12 investment zones will certainly support the levelling up agenda in those areas – many of which are in Key Cities’ membership.
However, numerous towns and cities will miss out on such initiatives, so we urge the government to address the impact on locations that are not afforded such status, especially in terms of infrastructure provision, productivity and skills. Specially, we would like to see investment in creative microclusters to spread economic growth and opportunity more evenly around the country, as part of a wider move to hyper-local devolution that connects policy agendas and empowers communities. Local leaders are best placed to develop and implement funding and policies that suit their individual businesses and communities, provided they are given the tools, autonomy and flexibility to do so.
It is heartening to see the chancellor’s commitment to addressing the climate crisis through significant investment in carbon technology and nuclear energy, both of which will also generate green jobs and keep the UK on track to meet its net zero target. The new nutrient neutrality credit schemes could also mitigate the environmental impact of new housebuilding whilst speeding up the planning process, but we urge caution to ensure this does not lead to lower quality outcomes for both people and planet in the long term.
We hope the government recognises that our Key Cities could be the engine rooms for the UK’s economic recovery, and steps up its investment and policies to ensure we can help our people and places to thrive.
Damien Sharkey
Managing director, HUB
Following the economic turmoil caused by previous statements over the past six months, this budget was notable for its mundanity – with a greater focus on slow and steady growth through fiscal incentives and supporting the workforce.
The government’s ambition to drive investment and level up the country by handing more powers to local leaders is to be celebrated, but for any city region awarded a trailblazer deal or investment zone, there are many more that miss out. We hope these initiatives are extended soon to help speed up regeneration across the country.
It was disappointing that there were no new measures announced to address the ever-increasing housing crisis. Accelerating the creation of new homes, whether city-centre apartments or houses in the suburbs, should be a priority for this and any future government. Only then can we properly support individuals, families and communities, as well as the long-term future of UK PLC.
Giles Heather
Director UK and Europe, Linesight
With the announcement of reform regulations for medicines and medical technologies in today’s budget, the government has reiterated its desire for the UK to become a global centre for life sciences development. However, the space for the facilities needed to make this happen is sorely lacking. Recent estimates show the UK has a two million sq ft deficit of space for life science facilities. For the UK to truly become a world leader in life sciences research, planning policy needs to be streamlined for developments, especially in urban areas, close to academia and research institutes, NHS research hospitals and existing life-science companies – which is essential for attracting international talent and addressing the UK’s need for space.
As local governments consider the location of 12 new investment zones across the country, they need to remember that Levelling Up requires a re-evaluation of how existing places are used to meet the needs of communities, particularly when it comes to health, life sciences and other social infrastructure. By placing community, health, sustainability and people at the heart of regeneration the government will be able to deliver both homes and jobs for local people through the creation of new innovation hubs, and it might even achieve its aim of making the UK a scientific superpower.
Trevor Morriss
Principal, SPPARC
The government’s new investment zones will provide a welcome boost to key regional cities. However, the inauspicious absence of planning reform creates a ceiling on the policy’s impact. Architects and developers are constantly endeavouring to respond to commercial demand but are held back as schemes languish in the planning system. Too often growing industries in the UK lose momentum as innovation is inhibited by a lack of affordable housing, offices and life science space. We need a joined-up approach, which connects the dots between investment and the physical capacity of cities.”
David Churchill
Partner, Carter Jonas
The original investment zone concept was that areas were identified for accelerated growth, free of regulation and certain taxes. As of the budget, the approach has morphed into something much more in line with the Industrial Strategy concept (promoted by the government since 2017), intended to refocus investment around established R&D and university links and to build on existing investment and strategies rather than to create new growth areas in a more organic, ‘bottom up’ manner. With the omission of any southern (south west, south east or the east of England) region from the 12 zones, there is a clear pivot to areas traditionally associated with the Levelling Up agenda.
The £80m per zone is to be spread across different interventions (tax incentives, skills, planning system ‘improvements’ and infrastructure). Given the scale of the zones, the impact will be limited. Areas considering investment zone status will have to carefully consider weighing up the benefits of doing so.
In contrast to the original investment zone concept, the ‘planning system improvements’ in relation to investment zones are unlikely to involve anything which goes against the current strategic planning system. So they are likely to be limited in their impact – albeit, a focus on increasing the resources available to local planning authorities would clearly be helpful in speeding up decision making. For landowners, the opportunity to benefit from investment zones will be secured through engagement and understanding the priorities of respective devolved administrations in the UK’s major conurbations – at least, those outside of the south of England.
James Shorthouse
Head of alternative markets, Colliers
The pub industry, and its customers, will raise a glass to the chancellor this afternoon as he froze the duty on draught beer so that customers will pay less tax on a pint in their local than when grabbing a beer from the supermarket shelves, but whilst operators will welcome the extra sales that the price differential will generate, the sector will also see that this was a missed opportunity for the chancellor to provide meaningful support to businesses by freezing or even scrapping business rates, or by introducing a permanent VAT reduction for the hospitality sector.
The budget did acknowledge that the leisure sector plays a crucial role in the economy with the continuation of reliefs for theatres, museums and orchestras, as well as support for leisure centres and swimming pools, but whilst pubs did take some cheer from the beer duty controls, there was little for the UK’s independent hotels, restaurants or café owners to celebrate.
Steven Rae
CEO, EVO
We were hoping that the chancellor would have delivered some much needed support for housing associations, registered providers and private landlords to fast track more accommodation of a suitable standard for those social tenants that are struggling the most. At any given time or place, there are swathes of uninhabitable dwellings, some still being lived in and others empty, that need urgent repairs in order to cut down housing waiting times.
The Levelling Up Bill – and its associated funds – are in theory a good idea, but there is so much disparity in every region that I would argue that genuine levelling up begins by upgrading the quality of housing in every local authority so that no-one has to live in damp, mouldy, cold or insecure properties and that every person has the right to warm shelter of an appropriate standard. We hope that such measures will be announced separately given its absence today. This simply must be a priority for the government.
Chris Hammond
Beau Property
Aside from regeneration projects in a few areas, there was little in the budget to help fast track development or housing. We need affordability to flow through the system with a more structured longer term approach to things like stamp duty such as a reduction for new or refurbished homes which are carbon efficient which would create an incentive for all stakeholders to both build and buy green. As a small housebuilder, we’d love the opportunity to be net zero but as we focus on older buildings, this is extraordinarily hard and costly and not something that our buyers seem to be concerned about currently.
The amount of embodied carbon saved in itself by restoring old buildings needs also to be taken into account. If the government were going to help to educate and provide grants for the increase in costs then certainly we would be able to realise our ambition of being carbon neutral. To give an example, one of our most recent projects is in a conservation area and a beautiful original structure in itself so external insulation was obviously not suitable.
In order to insulate above and beyond building regulations (which deem you need to achieve a 0.3 U Value) you’d need to give up more internal floorspace and of course that then reduces the amount of sq ft which developers need to factor into the end sales price. If the government is serious about net zero for all then there needs to be assistance for the SMEs announced and a greater weighting for those redeveloping older properties.
Richard Curry
Head of retail, Rapleys
In order for our high streets to survive we need some breathing space for retailers and retail services to reformat and adapt to the world around us. It has been like whack-a-mole for these businesses with interest rates, inflation, business rates, energy crisis, EPCs, supply chain issues, talent shortages, the to-ing and fro-ing on VAT and of course the ongoing political uncertainty.
A proper pause on business rates would have allowed landlords of empty buildings to repurpose and retailers to rethink their formats and footfall strategy for the longer term. At the moment we have a lot of acquisition programmes being scaled back back national retailers because of these uncertainties and this will likely go on until after a general election as it’s just too risky for businesses to open new stores unless they are no brainers for their catchment and strategy.
A lot of estates are deciding whether to use Capex for new stores or repurposing old stores to ensure they are future proofed sustainability-wise with the first commercial EPCs deadline imminent but largely unclear on the governance and penalties. If growing brands don’t need to rush an acquisition and/or have a more complicated and thus expensive fit out then they’ll wait and see how the budget and the future plays out. For example, will people start cutting their gym memberships or clothing allowances. Until we have certainty of government, policy and hurdles, the wait and see approach will prove sticky int his market for the majority of businesses – even if, ironically, it’s a good time to spend more. Pubs will of course welcome the draught relief badged as ‘the Brexit Pubs Guarantee’ meaning it’s 11% cheaper to have a pint in a pub than a supermarket.
Stephen Cox
Director of economics and regeneration, Stantec
It was positive to hear from the chancellor that the UK is expected to avoid a recession in 2023, and the easing of inflationary pressures should make the delivery of public sector grant funded projects more achievable.
It is important to see more responsibilities being handed to local leaders as well as vital economic decisions being made at a local level. While we welcome the investment and focus on levelling up the country, there needs to be a long-term emphasis placed on developing traditionally challenged areas, through strategic economic restructuring. This means concerted and continued investment in these communities. We would welcome further detail around these policies.
Given our experience supporting the development of research, education, and innovation projects across the UK, we know these innovation clusters could have an incredible impact on the communities they serve. Case-making and maximising the most promising schemes will be crucial for local authorities over the next period.
