Commercial sector needs fewer announcements and more action – ASTL

“The government takes out a bridging loan.” This was the reaction of a BBC2 commentator on the 2016 Budget proposals. Of course, when a customer takes out a bridging loan, one of the most important things for an underwriter to evaluate is the exit route.

The Chancellor set the redemption date at the 2019/2020 tax year. This is a brave forecast in an ever-changing economic world and presumes continuing low interest rates, an ‘in’ vote on 23 June, increased corporate tax revenues, savings on departmental expenditure and so on.

On balance, it seemed a good Budget for SMEs, property investment and especially commercial property. The Stamp Duty for commercial properties will be replaced with a system where only amounts above a certain figure will be charged differently, rather than the current ‘slab’ structure.

On the other hand, there will apparently be no exemption from the 3% SDLT surcharge for buy-to-let properties. However, this is offset by reduced corporation tax rates, higher personal allowances, proposals to raise the level where higher rate taxation cuts in to £45,000, and a massive reduction in CGT, excluding residential property.

Business rates for small firms occupying property with rateable values of up to £12,000 will pay no business rates, with a tapered rate of relief for properties with rateable values of up to £15,000. All this should encourage investment in commercial property.

As far as residential property is concerned, despite the reduction or elimination of tax on interest, if rates remain low and demand exceeds supply, this will remain a desirable investment, despite efforts to make this less attractive.

In the short term, delays in infrastructure implementation and building will continue to mean there is a shortage of affordable property in areas where this is needed. Hopefully, in the longer term, there will be fewer announcements and more action. The will is there, but it’s taking too long for this to be turned into concrete fact.

Proposals on education and improving skills will take time to bear fruit but, as Paul Krugman (Nobel prize-winning economist) said, “Productivity isn’t everything, but in the long run it is almost everything.” The Right Hon. Matthew Hancock also said, “economic stability is hard won” and the UK’s economic problems cannot be solved quickly. Let’s hope we are on the right track.