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The Spring Budget and what it means for…

16/03/2023

The Consumer

The extension of the energy price cap for an extra three months will do some good in protecting the consumer from additional extra cost of living pressures. With wholesale prices falling this year and the extension lasting to the summer, the hope will be that energy bills will fall back below the cap of c.£2,100 per annum. This will give the retailer some much-needed breathing room, although the accumulative impacts of inflation continue to impact the UK consumer. Although it’s clearly pointing out that the cap was £1,300 a year ago.

Businesses

The UK government has rightly identified the need to drive economic growth through productivity – enhancing the business environment against a backdrop of increasing business deaths, decreasing business births – and insolvencies as high as they have been since the Financial Crisis.

The shift from the super deduction to 100% qualifying capital expenditure will no doubt be helpful for growing businesses in growing sectors – as an example in evolving tech or circular economy sectors. However, there are concerns as to whether it stimulates continued business investment, as its temporary status may bring forward investment rather than add to the total gain - and it is essentially a downgrade in benefits in a challenging, inflationary economy. The extent to which the super deduction has so far driven business investment is difficult to ascertain due to the bounce back in the economy – despite the ambitious OBR forecasts. Expect that the increase in corporation tax will likely impact business investment too – although the Chancellor clearly disagrees.

There has also been a focus on attempting to drive the working population; despite unemployment being at low levels, the number of workers remains lower than pre-pandemic levels.

While the expansion of free childcare hours and the changes to universal credit have an undoubtedly positive impact on the consumer, the shift has the potential to alter the workforce over the medium term, keeping talented workers in the workforce – as the ‘cost’ of working is ameliorated. This focus on increasing the workforce can also be seen in the lifting of pension allowances for higher earners, with doctors specifically targeted, and the ‘returnerships’ apprenticeship.

Levelling Up

Levelling up is no longer the term ‘du jour’. However, the rolling out of the evolved, and scaled down Investment Zones, in combination with additional devolution to the Mayoral authorities – firstly for Manchester and Birmingham – and then others to follow, as well as existing Freeports and Innovation Accelerators, business rates retention are all borrowed from the ‘levelling up’ playbook. While we still need to see more detail, the cost of doing business doesn’t tend to be the main drag on many of these locations.  

The announcement of the new Enterprise Zones aligns with both the existing and new mayoralties – Liverpool City Region, Greater Manchester, South Yorkshire, West Yorkshire, Tees Valley, West Midlands, the North East and the East Midlands will all host Enterprise Zones – focused on life sciences, the creative industry, digital technology, advanced manufacturing and green industry. 

The trailblazer devolution deals mean that Mayoral Authorities will be given a single funding settlement – firstly Greater Manchester and Birmingham – similar to England and Wales, and therefore greater power on spending money locally. 
 

Sustainability

The talk of a ‘clean energy reset’ is disappointing considering the number of false starts that have been previously mooted. Investment in carbon capture in Wales and Merseyside is positive, particularly for those locations. However, the budget was light on the potentially easier wins – in the form of wind, tidal and solar.

Real Estate

There was plenty of talk in the lead-up to the budget on many of the big issues in real estate – mortgage assistance, housing targets, nutrient neutrality, rent caps, MEES. However, this may have been the most real estate-lite budget in recent history. For many, this will be seen as a missed opportunity. This doesn’t mean that there is no upside for real estate. However, many of the measures are aimed at underpinning business investment and subsequently, real estate demand. There were also small nuggets for some sectors – the focus on universities as a hub for investment; increased demand for nurseries; a continued focus on the life sciences sector; and, of course, a fillip for the pub sector in the tax freeze on draught beer.   

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Unlocking New Opportunities: The Removal Of PDR Restrictions For Commercial-To-Residential Conversions

In a significant policy shift, Michael Gove, the Secretary of State for Levelling Up, Housing and Communities, announced on 13 February, proposals to change Class MA Permitted Development Rights (PDR) so that current floorspace and vacancy requirements will be removed, allowing  commercial buildings of any size the freedom to be converted into new homes. 
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