As has become custom, Space and Time has put together an initial response to the Autumn Statement and given some consideration to how it might impact our industry and our clients’ prospects.
The Budget that never was
There was definitely a gorilla in the room on Monday. It must be rare that such considerable attention is given in the media and in parliament itself to a statement that will probably end up being of no lasting consequence.
With so much undecided about the trading conditions surrounding Brexit, and consequently almost no reliable insight about the UK’s fiscal expectation for the next financial year, and with a political imperative to “end austerity”, but few opportunities to borrow or tax more, Chancellor Hammond’s statement carried no big-ticket announcement and very little content to speak of. A watch-this-space budget perhaps: commemorative coins, potholes and tree planting.
Taxing the digital giants
One announcement of significance for our trade was the new digital services tax. Designed in part to help support the UK’s beleaguered high street (which also featured heavily elsewhere) but also likely to impact on digital advertisers, this levy will be set at 2% of UK-based revenues for digital businesses whose UK revenues exceed £500m. HMRC incomes when this tax is introduced in 2020 are estimated at around £400m pa.
With the companies concerned likely to argue that they trade in the digital sphere, with their revenue earnt outwith any specific country’s authority, the fallout and posturing here may prove interesting over the next couple of years. Since they are all registered in the US for tax purposes, there might also be a view or two expressed by a home country leery of a new precedent that might ultimately impact its own coffers.
Even if all of the cost incurred by the likes of Google, Bing and Facebook is passed directly onto advertisers, the impact on the mix of an average media schedule is likely to be minimal. Each of the digital giants will be subject to the same charge, and each of them is in many instances more than 2% more cost-effective than more “traditional” media platforms.
The existing relief from stamp duty for first-time buyers buying a home in England, Wales and Northern Ireland for less than £500k was extended to include people buying their first home through shared equity. As before, eligible FTBs will pay nothing on the first £300k of their home, and 5% on the amount between £300k and £500k, however, this discount will now also be available where the purchase is made in tranches as part of an approved shared ownership scheme, rather than outright.
With many FTB shared ownership purchases falling below or near to the £125k SDLT threshold, in practice, it’s likely that relatively few households will be significantly impacted by this change, and it is anticipated to have a minimal impact on the volume of homes purchased through shared ownership. However, it may provide a small pricing impact on the wider property market: many commentators have observed that the original scheme announced last November ended up being of little benefit to first time buyers since the extra buying power afforded by the relief simply worked to push up average house prices by a proportionate amount.
More money for more houses
Predictably, there was a commitment to spend more on housing. If ever a budget didn’t include such a promise, would it really be a budget?
£1 billion for smaller developers
Possibly delivering a greater impact for the volume of completions in the UK, the budget also saw the government agree to underwrite an additional £1bn of loans to small housebuilders, through the British Business Bank.
Help to Buy
Help to Buy was this week extended for first-time buyers until at least 2023, having previously only been confirmed until 2021. As repayments from the earliest participants in the scheme begin to come, it’s speculated that HTB should start to fund itself in part. Even with the very early warning provided, the dent that ending the scheme would have put into the property market meant that removing it in 2021 would always have been difficult economically and politically for any government.
So, what now?
Acknowledging the limitations of his own crystal ball, Mr Hammond outlined a proposal to turn next Spring’s financial statement to a full budget if needed.
As you might expect, we’ve been doing our own rune-reading at Space and Time: studying our own figures; analysing our clients’ performance metrics and investing in third-party research that might help us all know what to expect during quarter one and beyond. If you already work with us, your team will be in touch to discuss our findings in the near future.