3 Industry Takeaways from the Autumn Budget
Research-based insight from JLL experts following the Autumn Budget 2018.
Overall Reaction: Jon Neale, Head of UK Research, JLL
“The Budget’s big news stories were the fiscal windfall and its use to provide funding boost for the NHS. But beneath these headlines, there were some interesting shifts in the government approach to the changing economy.
“The digital services tax of 2% is an interesting and rather radical move. It seems that the revenue from certain retail services provided online will be subject to additional taxation. The fact that this comes at the same time as rates relief for smaller business (including a lot of High Street retail) shows that the government is thinking about levelling the retail playing field.”
“The impacts may be relatively subdued at first, but this is more interesting as the start of a new direction of travel, both in the UK and internationally. It will be interesting to see how the big tech groups react.”
“Meanwhile, the government is clearly keen to reduce some of the burdens on other businesses and promote investment, given the changes to the Apprenticeship Levy and the Annual Investment Allowance.”
Industrial Impact: Digital Services Tax
‘Online retailers have been driving demand for big box logistics floorspace in the UK by improving supply chains to address the growing demand from customers to receive their goods as soon as possible. The introduction of a ‘new digital services tax’ for the bigger corporates by 2020 may create a small impact further down the line for companies but with large corporates needing to meet the demand from customers it is unlikely to hamper demand for logistics floorspace across the UK in the short term.’ Tessa English, Associate Director for Research, Industrial & Logistics, JLL.
Retirement Living: Social Care Green Paper
‘Any additional funding for social care is always welcome, but this measure is still just a sticking plaster solution to a much greater problem. The ageing population is already having a profound impact, not just on social care, but demand on housing. Over 65s will account for 59% of population growth by 2026 and are soon set to account for 1 in 4 people. We eagerly await the Green Paper but it appears the government continues to ignore the potential of retirement living as a sustainable solution.’ James Kingdom, Associate Director for Alternatives, JLL.
Business Rates: Rejuvenating the High Street
We welcome the Chancellors announcement providing business rates relief of up to one third for the next two years for retail businesses with a rateable value of less than £51,000.
It will be interesting to see if the devolved parliaments in Scotland and Wales use this money in the same way as England.
Contrary to the Chancellors statement, in which he recognised the high fixed cost that Business Rates represent for business, by limiting the relief to 2 years until the Revaluation in 2021 this is still just a still a temporary sticking plaster rather than a permanent fix to a problem that isn’t going to go away.
The only way of to provide a medium to long term solution is to reduce the unacceptably high level of taxation itself (UK Business Rates are the highest in the developed world) which for most businesses in London is now a tax rate of over 50%.
The government should have taken steps to have a maximum multiplier for 2019/20 reducing it for 2020/21 and then to fix the multiplier at a maximum of 40% for the 3 year period of the 2021 Revaluation once income from the new Digital Tax comes on stream.
The government also needs to focus on the wider business rate system and shelve the disastrous Check Challenge Appeal process which is still not fit for purpose over 18 months into the 2017 Revaluation. It could quite easily and quickly revert to the scheme operated in Wales freeing business from the unnecessary red tape and bureaucracy required by Check Challenge Appeal. The government’s election manifesto pledged to reduce red tape for business and axing Check Challenge Appeal would be a huge step forward to fulfilling a key manifesto commitment.
Tim Beattie, JLL Lead Director - Rating