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In the spotlight: Our monthly news round-up (October 2020)

Posted by
Rouse Partners
01.10.2020

Now it is easy to keep up-to-date, with our monthly ‘In the Spotlight’ news round-up – a hand-picked summary of key tax news and industry developments. If you have any questions on how any of these affect you personally, please do not hesitate to contact us.

Individuals

Government confirms it will maintain triple lock – The Government has confirmed it will maintain the triple lock and increase the state pension in 2021-22 despite speculation that it might be scrapped due to COVID-19. Legislation was tabled yesterday to avoid the state pension being frozen in April because of the fall in average earnings. Rishi Sunak has been pushing for the triple lock to be suspended for fear of soaring costs because of the recession and a fall in wages caused by the furlough scheme, which covers 80% of earnings. Ian Browne, a pensions expert at Quilter, said that the triple lock could lead to “intergenerational unfairness” as wages fall and pension incomes rise. (Source: The Times, 24/09/20)

Be quick to secure stamp duty boost – Estate agent body NAEA Propertymark has advised those looking to take advantage of the stamp duty holiday that they may need to act quickly. It says sellers need to market their home by the end of September to maximise their chances of getting the transaction completed before the March 31 2021 cut-off, noting many conveyancing services are operating at reduced levels, while mortgage applications and surveys are also said to be suffering delays amid backlogs and staffing issues. (Source: Mail on Sunday, 13/09/20)

Pension freedoms age rising – The Government has confirmed that the pension freedoms age is set to rise from 55 to 57, with the increase in the age that people can access personal pensions coming into effect in 2028. The change to defined contribution pensions was confirmed in a written ministerial statement by economic secretary to the Treasury John Glen. Steven Cameron, pensions director at Aegon, said that the Government indicated that the shift was on the cards in 2014, but didn’t include provisions in legislation, leading to uncertainty over whether the change was actually occurring. Pointing to “government communication gaps” which meant many women found out too late that their state pension age was increasing from 60 to 65, he said it is “imperative” that ministers and the industry make sure the change in pension freedoms age is clear to all those saving in pensions. (Source: Daily Telegraph, 04/09/20)

Businesses

UK business activity growth slows as new Covid-19 restrictions take effect – Growth in business activity in the UK slowed in September, according to a closely watched survey that indicated a summer economic surge was at risk from new restrictions to curb coronavirus. The IHS Markit/Cips UK flash composite purchasing managers’ index, down from a 72-month high of 59.1 in August but still above the 50-mark separating expansion from contraction. The flash reading, based on 85% of the usual monthly responses, was taken before the prime minister announced further restrictions to control coronavirus on Tuesday. IHS Markit economist Chris Williamson warned: “Unemployment is likely to soon start rising sharply…(which) raises fears that growth could fade further as we head into the winter months, especially as lockdown measures are tightened further”. (Source: Financial Times, 24/09/20)

GDP slip less severe than feared – Revised figures from the Office for National Statistics (ONS) show the economy contracted by 19.8% in Q2. Although the decline in GDP hit a record level, it is less severe than initially thought, with a previous official estimate suggesting GDP fell 20.4%. The slip in GDP across Q1 was also revised, from 2.2% to 2.5%. The analysis shows that in the first six months of 2020, the economy shrank by 21.8%, exceeding a previous estimate of 22.1%. With the coronavirus lockdown shutting much of the economy, household spending in Q2 was down £80.5bn, representing a fall of 24.2%. The ONS report also reveals that households saved a record 29.1% of their income in Q2, a steep jump on the 9.6% recorded in Q1. (Source: The Times, 01/10/20)

Small firms voice concern over jobs scheme – Small firms have voiced concern that they may struggle to access Chancellor Rishi Sunak’s £2bn flagship jobs scheme. Smaller businesses say they are disadvantaged as the Kickstart initiative bars firms taking on fewer than 30 new young workers from applying directly for funds. The scheme offers six-month paid placements for young people on universal credit, with the Government paying 100% of the national minimum wage for up to 25 hours a week. Mike Cherry, chairman of the Federation of Small Businesses, said: “Small firms, who are the largest employers across the business landscape, have long expressed interest in this scheme and will be disappointed to find it harder than expected to take part.” He added: “To put it bluntly, this scheme has not been designed with small businesses front of mind.” Joe Fitzsimons, of the Institute of Directors, said the 30 placement requirement “could gi ve cause for concern”, adding: “With so much on their plate, many small firms will be put off by any unnecessary hurdles.” (Source: Financial Times, 01/10/20)

More staff returned to offices in September – Analysis show s that 45% of UK office staff returned to their workplaces in September, up from 37% in August and 34% in July. The increase recorded last month came before Prime Minister Boris Johnson urged employees in England to work from home where possible to help try and contain a possible second wave of coronavirus. The data, collected by the Alphawise research unit of Morgan Stanley investment bank, reveals that the UK was lagging well behind much of Europe, where 75% of office staff had returned to the office. However, it was shown that 32% of UK office staff were working from home five days per week. Morgan Stanley said this made Britain a “notable outlier” in this area, with just 16-19% of office staff working from home five days a week across continental Europe. (Source: The Guardian, 03/10/20)

SMEs detail pandemic impact – A poll of UK alumni of Goldman Sachs’ 10,000 Small Businesses programme shows that 99% believe they will survive the coronavirus crisis, assuming there are no further national lockdowns. The poll saw 64% say revenue had decreased, while 44% had reduced headcount and 75% had used the furlough scheme. It was also shown that 45% of firms have changed their business model due to the pandemic, with three quarters expecting this to be a permanent change. (Source: The Daily Telegraph, 01/10/20)

Businesses forced to close to be eligible for grants – The Chief Secretary to the Treasury Stephen Barclay has announced a new scheme to help businesses survive closures due to coronavirus lockdowns. Large businesses in England which are forced to close as a result of a local lockdown will now be able to claim a £1,500 grant per property for every three weeks they are not able to open their doors. Smaller businesses will receive £1,000. The British Chambers of Commerce welcomed the payments but warned they would not be enough for many firms. Mike Cherry, the national chairman of the Federation of Small Businesses, described the intervention as “a much needed additional financial lifeline” while Annie Gascoyne, of the Confederation of British Industry, warned that more targeted support would be needed in the autumn. (Source: Financial Times, 10/09/20)

UK companies under-prepared for Brexit, BCC finds – Analysis by the British Chambers of Commerce suggests only half of UK firms have taken steps recommended by the Government to prepare for Brexit while just 38% have completed a Brexit risk assessment this year, compared with 57% in 2019. BCC Director General Adam Marshall said: “The Government must ramp up engagement with businesses urgently to ensure that the real-world issues facing firms get tackled immediately.” (Source: Bloomberg, 24/09/20)

Construction/property

House prices up 5% to £226,129 – Data from Nationwide reveals that UK house prices were up 5% in September compared with a year ago. This marks the biggest rate of annual growth in four years. Month-on-month, prices in September were up 0.9% on August, while quarter-on-quarter, July through September saw prices climb 1.7% compared to the previous three months. The figures show that the average house price hit £226,129 in September. In London, prices were up 4.4% in Q3, with the average price in the capital hitting a record high of £480,857. Robert Gardner, Nationwide’s chief economist, said the rebound in prices “reflects a number of factors”, adding: “Pent-up demand is coming through, with decisions taken to move before lockdown now progressing.” Chancellor Rishi Sunak’s stamp duty holiday, which runs until the end of March 2021, was also noted as a factor in increased market activity. (Source: bbc News, 01/10/20)

City centres see tenant exodus – Private rents in some parts of London have fallen by up to 20% in the wake of the coronavirus outbreak. With renters quitting the capital, fewer international students seeking accommodation near places of education and firms putting relocation plans on hold, the dip in demand has resulted in an oversupply that means rents have come down in some areas. While average rents in London are down by around 4% on a year ago – and 6% or 7% in prime areas – agents say rents in and around the Barbican have fallen by 20%, while rents in Bloomsbury and Clerkenwell are down by around 10%. (Source: The Observer, 20/09/20)

Commercial landlords face £4.5bn in unpaid rent – The British Property Federation (BPF) has cautioned that commercial property landlords could face unpaid rent bills of more than £4bn in 2020, as a ban on business evictions was extended by the Government. The BPF estimates total rent unpaid for UK commercial property between late March and the end of December will be around £4.5bn. While this covers sites including offices and warehouses, the retail and hospitality sectors are likely to account for the vast majority of the unpaid rent. A spokesman for the Ministry of Housing, Communities and Local Government said: “We recognise the current challenges facing commercial landlords and the significant impact recent changes are having on their business models. We will continue to work urgently with the sector to ensure it is adequately supported.” (Source: Evening Standard, 18/09/20)

CGT plans could deliver £27k hit for BTL landlords – Research by estate agent Hamptons International suggests that proposed changes to capital gains tax could cost buy-to-let landlords up to £27,000 more for each property sold. With the Chancellor reportedly considering increasing the CGT rate from 28% to 40% for a higher-rate taxpayer and from 18% to 20% for a basic rate taxpayer, analysis suggests that lower-rate taxpayers will be worse off by an average £1,130 when selling up, while higher-rate payers will pay on average £6,800 more. Meanwhile, John Cronin, a banks analyst at Goodbody, said the mooted reform of CGT could shake up the housing industry by putting off part-time landlords and creating a gap that professional landlords could fill. (Source: The Times, 02/09/20)

Investors look to holiday lets – The Times’ Jessie Hewitson says that while the Treasury has “radically pruned” the tax breaks available on most mainstream investments, holiday homes are the one money-making venture that lets an investor potentially avoid the “accounting holy trinity” of income tax, capital gains tax and inheritance tax. (Source: The Times, 05/09/20)

Recruitment

Jobs recovery evident but pay continues to fall – The latest Report on Jobs survey from the Recruitment and Employment Confederation shows hiring increased last month for the first time since March. However, pay continues to fall as rising unemployment shifts the balance in the labour market from workers to business. Job placings for temporary workers grew at the quickest rate in 20 months while permanent placings rose only “marginally”. The loss of 750,000 jobs between March and July combined with the jobs lost among the self-employed was behind a continued fall in starting salaries in August, the report found. (Source: The Times, 09/09/20)

Technology

EC president: EU will target tech firms over tax – Ursula von der Leyen, president of the European Commission, says the EU will introduce a digital tax on firms such as Google and Facebook if nations fail to reach an agreement on levies to target global tech giants. The Telegraph notes that efforts to ensure large tech firms pay their share in taxes have gathered momentum in recent years, with proposals drawn up with the OECD and G20 gaining support in the EU, although plans for an international framework for a digital tax were dealt a blow earlier this year when the US pulled out of talks and warned it could retaliate against policies targeting US firms. (Source: The Daily Telegraph, 17/09/20)

Manufacturing

Manufacturers slash investment – Research by trade group MakeUK shows manufacturing companies’ spending plans dropped to a balance of minus 32% in the third quarter, down from minus 26% in the previous period. Pre-Covid investment intentions were running at plus 20% in the first quarter of 2020. Make UK said it expected manufacturing output to fall by almost 11% this year, and downgraded its forecast for recovery in 2021 from 6.2% to 5.1%. (Source: The Daily Telegraph, 21/09/20)

Hospitality

Extension call for business rates holiday – Business leaders in the capital have called on ministers to extend the business rates holiday, which is due to expire in March, warning that without further support jobs could be at risk. Jace Tyrrell at lobby group New West End Company said: “The reintroduction of business rates in April 2021 will be a final blow for many businesses already struggling to meet costs”. Jerry Schurder, head of business rates at property consultancy Gerald Eve, notes fears over poor footfall and a potential second lockdown, warning: “London’s businesses are hugely concerned that without an extension of the holiday many more outlets will simply be unable to continue to trade.” London Mayor Sadiq Khan has called for the business rates holiday to be extended by a year, voicing concern that without this measure “many employers will have no choice but to make more people unemployed.” (Source: Evening Standard, 19/09/10)

Business hits back after VAT body blow – Retailers, tourism-focused firms and airport operators are considering legal action over the Government’s plan to scrap VAT relief for overseas visitors at the end of the Brexit transition period. (Source: Financial Times, 15/09/20)

Shopper numbers slip – Market research firm Springboard has revealed that shopper numbers across UK retail destinations were down 6.3% last week compared with the week before, with the first week-on-week decline since April. Footfall across UK high streets declined 5.4% and by 5.2% at retail parks. While regional cities saw a 7.9% fall in footfall, the decline in central London was just 3%. Springboard said a dip in the week when the school year starts is common but the scale is greater this year. Director Diane Wehrle remarked: “Whilst this is a pattern of consumer activity that Springboard has come to expect – we have seen this drop occur in all but one year since we started publishing our footfall indices in 2009 – the magnitude of the drop has been larger than in any previous year. This signifies the continued impact of many Brits continuing to work from home as offices across the UK remain closed.” The annual decline in shopper numbers stood at 27.5% last week, compared with a 25% dip recorded the previous week. (Source: City AM, 15/09/20)

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