CBRE Comments on the Autumn Statement 2022
Read CBRE's reaction to the Autumn Statement:
We have today received some clarity on the Government’s plan in the face of financial turbulence. Jeremy Hunt’s announcement is designed to strike the balance between reducing inflation and the national debt, without deepening the looming recession. The key was to bring inflation under control to allow a sound path to growth. This can be seen in the stealth approach to the personal tax changes.
The Chancellor’s announcement included a significant update on business rates, which will provide a substantial boost for the retail sector. The relationship between rates payable and rents has been out of sync for some time, and we predict that this rate reduction will restore balance in the retail market for both landlord and tenant.
The Chancellor’s package for the Research & Development sector is more good news. We are pleased to see the Chancellor has increased the Research & Development budget by £20bn as part of a package to help the UK become a ‘Science Super Power.’ CBRE research shows that the UK is making big advancements in life sciences; over the past five years the amount of Venture Capital investment has more than doubled, and the number of firms is up by around 20%. The UK also punches above its weight academically, with four universities in the global top ten. London is the only city to have four universities in the global Top 50. We hope that our position will be bolstered by today’s announcement of a review of EU regulations to be concluded at the end of 2023, which will consider changes to help promote the competitiveness of five key growth sectors, including Life Sciences, Digital and Financial Services. Furthermore, the shift of focus of investment zones will reassure many that wider levelling up funding is set to continue and will match previous levels, along with a new commitment to create knowledge intensive growth clusters.
We expect the significant reductions to Capital Gains Tax from £12,000 to £3,000 in the next three years might encourage Buy-To-Let landlords that were already thinking of selling up to do so sooner. In terms of the rental market, we expect the 7% cap on affordable rents to give Housing Associations more capacity, as they would have been planning for a 5% cap, but whether renters can afford the rise will be a different story.
The range of sustainability measures is welcomed, supported by raising £14bn from windfall profit tax measures on oil and gas companies alone next year. Energy efficiency measures are much-needed and long-overdue, but we would like to have seen more clarity on measures specifically supporting the delivery of net zero emissions. We hope that robust net zero strategies, incorporating environmental protection, remain a priority.
The Chancellor has thrown the High Street a lifeline. He confirmed in his Autumn Statement that the revaluation will proceed in April 2023. The expected reductions in the business rates tax of 30-60% will be realised in full across the retail sector as he has removed the caps which previously prevented this. He has also stated that inflation will not impact the multiplier used to calculate the tax. Quite possibly the best news for retail and indeed all struggling businesses for some considerable time.
This is the most significant rating moment I can recall in my career. Rates payable have been out of sync with rents for some time, creating issues which have led and contributed toward some significant structural change amongst many retailers. A rate reduction of this scale now allows for harmonisation in the retail market on both the landlord and tenant side and furthermore, allows for consequential savings across the industry.