This story will be updated throughout the day with industry reaction.
Chancellor of the Exchequer Kwasi Kwarteng has delivered his "mini Budget", the first major fiscal intervention from new PM Liz Truss's government aimed at helping the moribund UK economy.
As expected, it included a wave of tax cuts the administration believes will turn the country into a "nation of entrepreneurs", with high energy costs prioritised among moves to "break the cycle" of low economic growth and "stagflation".
On energy costs, Kwarteng said, alongside the already announced £2,500 price cap for residential households, the energy bill relief scheme will reduce costs for all businesses across the country.
Among a series of major interventions, stamp duty has been cut in England and Northern Ireland, the basic rate of income tax will be cut to 19p next year, the proposed increase in corporation tax from 19% to 25% has been scrapped, caps on bankers' bonuses have been lifted and the recent rise in National Insurance – the social security tax people pay in their earnings – will be reversed from 6 November.
There were many specific announcements relating to the day-to-day working of the real estate industry. Eye-catching announcements on planning reform and investment zones went hand in hand with silence on the industry's bete noire – business rates. So what do real estate experts think of it all?
Stephanie Hyde, chief executive, JLL UK, caught the initial mood saying it "was anything but a mini-budget, with stamp duty cuts and investment zones each significant in their own right".
She added: "The introduction of investment zones demonstrates a continued focus on tackling regional inequalities and levelling up, and reinforces the significant role that the real estate sector can play in the country’s economic growth.
“What business needs is certainty around the government’s commitments to spending on regeneration, infrastructure, skills and net zero projects. This will provide clarity on the ‘power of the private sector’, in the chancellor’s own words, to deliver levelling up at pace in partnership with the government.”
Melanie Leech, chief executive at the British Property Federation, said it represents a "bold ambition for growth, and its aim to ‘Get Britain Building’ is at the very heart of it".
She added: "The property sector is fully committed to working with the government to unleash private capital, remove barriers to investment and accelerate the delivery of the workspaces and homes that we need to transform regional economies.”
Walter Boettcher, head of research and economics at Colliers said the Budget had focused on growth rather than austerity and that might be interpreted as a "step back to pre-GFC capitalism" given the scrapping of banker bonuses and the top rate of income tax, a rescinding of the impending corporation tax rise and announcement of an "ambitious package of regulatory reform’"
Boettcher says that "for once" the UK commercial real estate sector looks to be a clear beneficiary given direct measures such as the creation and enhancement of tax-free development zones, disposing of surplus government land, and "above all" the announcement of planning reform to better co-ordinate and streamline infrastructure investment.
"That will be a boost to regional development generally. The Chancellor said the focus would be less on redistribution and more on growth and wealth creation, yet the regional component to the government’s plan would appear to be a positive step in levelling up."
Boettcher added that borrowing substantially to insulate households and businesses from an "exogenous energy price surge, while at the same time priming an ambitious economic growth agenda" will be all the more challenging as the Bank of England raises rates and the economy slides into recession.
"It has been characterised by many as an ambitious gamble. Judging by the initial reaction of markets, it might otherwise be likened to freeclimbing without protection on an unfamiliar rock face.”
Planning Reforms and Investment Zones
Kwarteng announced a Bill would be introduced to "unpack the complex patchwork of planning restrictions and EU derived legislation" holding back major development.
His "Growth Plan", as the government called the mini Budget pledges a new Planning and Infrastructure Bill that will "accelerate priority major infrastructure projects across England, by: minimising the burden of environmental assessments; making consultation requirements more proportionate; reforming habitats and species regulation; and increasing flexibility to make changes to a Development Consent Order once it has been submitted".
It also announces "sector-specific changes to accelerate infrastructure delivery, including: bringing onshore wind planning policy in line with other infrastructure to allow it to be deployed more easily in England; reforms to accelerate road delivery through more streamlined consent processes; and giving telecoms operators easier access to telegraph poles on private land. These reforms will mean that energy infrastructure, including renewables, gets built more quickly. The government will work with the devolved administrations in relation to devolved planning responsibilities".
There will be more than 40 new so-called investment zones in England.
The zones – which are being negotiated in areas including the West Midlands, the Tees Valley and Norfolk – will provide time-limited tax reliefs and planning liberalisation to support employment, investment and home ownership.
Investment zones will be chosen following a "rapid Expression of interest" process "open to everyone". The government said it remains committed to the ongoing Freeport programme and will talk to the devolved administrations in Scotland, Wales and Northern Ireland about introducing the zones there.
Incentives in the zones proposed are:
- Lower taxes. Businesses in designated sites will benefit from time-limited tax incentives.
- Accelerated development. There will be designated development sites to deliver growth and housing. Where planning applications already exist, they will be streamlined and government will work with sites to understand what specific measures are needed to unlock growth, including "disapplying legacy EU red tape where appropriate". Development sites may be co-located with, or separate to, tax sites, depending on what makes most sense for the local economy.
- Wider support for local growth. For example, through greater control over local growth funding for areas with appropriate governance. Subject to demonstrating readiness, Mayoral Combined Authorities hosting Investment Zones will receive a single local growth settlement in the next Spending Review period.
Specified sites in England will benefit from a range of time-limited tax incentives over 10 years. The tax incentives under consideration are:
- Business rates. 100% relief from business rates on newly occupied business premises, and certain existing businesses where they expand in English Investment Zone tax sites. Councils hosting Investment Zones will receive 100% of the business rates growth in designated sites above an agreed baseline for 25 years.
- Enhanced Capital Allowance. 100% first year allowance for companies’ qualifying expenditure on plant and machinery assets for use in tax sites.
- Enhanced Structures and Buildings Allowance. Accelerated relief to allow businesses to reduce their taxable profits by 20% of the cost of qualifying non-residential investment per year, relieving 100% of their cost of investment over five years.
On major infrastructure the Budget proposes "accelerating the construction of vital infrastructure projects by liberalising the planning system and streamlining consultation and approval requirements".
Mike Derbyshire, head of planning at Bidwells, said it was pleasing to see the government commit to sweeping reforms of the planning system as part of the PM's "investment zones" policy, but said accelerated measures that translate these proposals into much needed legislation will be vital.
"This isn’t the time for dither or delay. In areas like the Oxford-Cambridge Arc – an economic engine that is responsible for seven percent of England's total output – a lack of development is threatening to place a lid on the region's huge potential. Cambridge, home to the likes of AstraZeneca and Apple, has no available lab space left despite a two million-square-foot demand according to our own research, meaning the unicorns of tomorrow are being locked out of the market and will inevitably fail to scale – in turn denting opportunities to commercialise drug and treatment discovery."
Derbyshire added that "unspecific and outdated planning laws, which are restricting the supply of purpose-built life science space", have led to lab rents rocketing to historic highs in Oxford and Cambridge as companies vie for limited space. "That's pricing innovative firms out of a market that should be thriving."
Leech of the BPF, said accelerating the speed of delivery helps "our members’ investment in housing and enables them to deliver more".
She added: "We await the detail but today’s announcement on planning reforms in investment zones sounds promising, and if properly resourced in local authorities should deliver more investment in homes across the country in places that are bidding for investment zone status.”
Trevor Morriss, principal at architecture studio SPPARC, said the introduction of investment zones with more flexible rules to support planning and development is a positive indication that the government wants to get Britain building.
"However, we desperately need consistency in policy and approach to ensure delivery.”
“Over the last 12 years we’ve had 13 housing ministers. This is the fourth in 2022. New legislation like the Levelling Up Bill has fallen off the statute books faster than the time it takes to receive permission for new development. The revolving door of new decision-makers and doubt that casts on promises of change is damaging to our economic growth and long-term prosperity – so we must see the government act swiftly to deliver in the months ahead to fulfil the much needed outcome.”
Jessica Bowles, director of strategy at Bruntwood, said the idea behind investment zones is a good one "if they are developed through local collaboration and partnership and build long-term business confidence".
"To be game-changers they need to be properly rooted in the vision and opportunity of their towns and cities with strong connections to their communities, good quality jobs, great placemaking and with long-term investors from both public and private sector. "
“All eyes will be on the budget proper later this autumn where we hope to hear more about long-term investment in our regional economies.”
Stamp Duty Land Tax
From 23 September the threshold from which stamp duty land tax must be paid will be doubled to £250,000 for all home purchases. The threshold at which first-time buyers begin to pay SDLT will increase from £300,000 to £425,000, and the maximum value of a property on which first-time buyers’ relief can be claimed will also increase from £500,000 to £625,000.
In the new investment zones there will be a "full Stamp Duty Land Tax relief for land and buildings bought for use or development for commercial purposes, and for purchases of land or buildings for new residential development".
Daryl Perry, Head of Research & Insight at Cushman & Wakefield, said in a statement: “The stamp duty changes announced today are likely to support house prices, although much will depend on to what extent mortgage rate increases will undermine this support.
“Ultimately, the changes are not going to help solve fundamental affordability issues. If anything, they are going to be made worse in the long term. A measure to change the systemic issues is needed to push housing market reform and increase supply in both the owned and rented markets, and not just stimulate an already overheated market.”
Business Rates
The Budget was notably quiet on business rates and the range of reforms the property industry has been calling for, something experts say undermines the hoped for impact of tax-cutting measures for corporate Britain.
Robert Hayton, UK president at the real estate adviser Altus Group, said: “For a self-proclaimed low tax, pro-growth, pro-business Government, it beggars' belief that inaction on business rates could see the total tax take rise by £5.33 billion next April with discounts for retail, leisure and hospitality ending as well as the Government profiteering from high inflation.”
John Webber, head of business rates at Colliers, said the lack of movement was "disappointing" and that if government really wants to simplify the tax system, it will remove any planned implementation of phased downwards transition in the next revaluation – "otherwise this will stifle recovery in the high street and hinder any levelling up agenda".
He added that the "elephant in the room" had been ignored.
"Business rates is one of the highest outgoings for occupiers of property. The tax raises around £32 billion a year gross (£26 billion net) and with rates rising in line with CPI inflation levels for September, predicted to be around 10%, this could potentially add a further £3 billion to the tax bill if nothing is done.
"With just six months to go before the next revaluation, businesses still have no idea what their rateable values will be, what the multiplier will be nor how the government will response to its summer consultation on transitional relief. With no clarity about how much they will be expected to pay in their rates bills come April, how can businesses be expected to plan sensibly ahead?"
Webber added: "It’s all very well giving reassurance over high energy bills and other taxes, but all this will be meaningless if business rates are allowed to soar.
"We are disappointed the Chancellor did not mention this in his Statement today and hope in the next few weeks he will address this issue.”
Josh Myerson, partner and head of rating at Montagu Evans, said: “The Chancellor’s fiscal statement this morning was a missed opportunity to address the issue of business rates head on. We welcome the statement that newly occupied or extended premises within the new investment zones will not pay business rates, but in reality this will only help a small percentage of the business community that is struggling with their rates burden. This ongoing uncertainty, with no commitment to freeze the multiplier or abolish downwards phasing, coupled with the decision to delay publication of the Draft List, is extremely unhelpful.”
Melanie Leech, chief executive of the BPF, said: "It is disappointing the government has not taken wider action on business rates. This archaic tax is one of the fundamental causes of high street and town centre decline and its current unsustainable burden on businesses does not fit with the government’s vision for a low tax, dynamic economy. We urge government to look again at how the system can be modernised.”
David Gregory, associate at lawyer Charles Russell Speechlys, said it is currently unclear how far-reaching and long-lasting the exemption for business rates in investment zones will be.
"However, the Chancellor appears to have stopped short of increasing the threshold for small business rates relief, meaning existing occupiers will be largely unaffected by this announcement. This is likely to be a blow for small businesses who were hoping for additional support at a time when high inflation is leading to higher rates, particularly in London and other urban centres.
"Overall, this is a step in the right direction, but further support for existing occupiers may be needed and, in the longer term, larger scale reform of the business rates system."
Housebuilding and Freeing Up Government Land
The Budget promises to accelerate housing delivery, saying more reform is needed.
Later this autumn, the government will set out a "vision to unlock home ownership for a new generation by building more homes in the places people want to live and work and by getting our housing market moving". The full proposal will be set out later but the mini Budget says it will promote the disposal of surplus public sector land by allowing departments greater flexibility to reinvest the proceeds of land sales over multiple years.
It says this will encourage the sale of more public land for housing and allow departments and the NHS to reinvest in public services. Devolved administrations have bespoke flexibilities to move funding between financial years.
Infrastructure Planning Reform
The Budget says it will prioritise the delivery of National Policy Statements for energy, water resources and national networks, and promises a cross-government action plan for reform of the Nationally Significant Infrastructure planning system.
Retail Relief
There was some welcome news for retailers. For high streets, airports and shopping centres government has decided to introduce VAT free shopping for overseas visitors.
Kwarteng said this is part of the UK's drive to "modernise".
Roger Clarke, chief executive of real estate stock exchange, IPSX, says the jury is very much out on whether the government's intervention will have the desired effect of sparking long-term economic growth: “In the absence of cheap credit, the government is attempting to pull all levers at its disposal to support household finances and consumer spending. It’s hoped that the widespread deregulation and cuts to headline tax rates will release a wave of investment and consumption, although there is much debate around the credibility of this loose fiscal approach.
"What we do know is that costs are expected to continue spiralling and all macro indicators point to a year-long recession ahead. One of the biggest concerns is that inflation remains at a 40 year high and purchasing power will continue deteriorating. Non-essential spending is expected to continue falling until inflation peaks next year and investment portfolios will see reallocations to hedge against wealth erosion.”