Member Article

Business and investors need certainty from Budget

Ahead of the Conservatives’ first Budget, we have seen much debate already about what will be announced today. With the Brexit referendum on the horizon, the Chancellor needs to be cautious about introducing too much additional taxation and regulation as this could further impact on consumer and business confidence and discourage investment in growth.

Despite the planned cuts to pension tax relief being off the table, we are concerned about the impact the planned stamp duty hike on buy-to-let homes could have. Following the pension reforms, a lot of people saw an opportunity to draw their pension pot for investment in a buy-to-let property, the stamp duty levy will be an impediment to that.

While it is understandable that the Government wants to increase housing supply, we do not believe that increasing stamp duty will have the desired effect. These changes will also have unforeseen complications, for example for those trying to move jobs from one area to another who may not be able to sell their homes straight away. In addition, those with buy-to-let investments may decide not to sell, as they will increase the costs of buying back into the market in the future. The risk with this interventionist approach is that the costs simply get passed on to the tenants and it fails to translate into homeownership for occupiers.

Furthermore, the forthcoming hike is reportedly already having a distortive effect on housing supply, slowing transactions at the higher end of the London market and pushing prices up at the bottom end, as people rush to complete home purchases before the new rules come into play in April. These new rules bring uncertainty into the housing market, which will have an adverse effect on our economy. In addition, the Financial Policy Committee has passed legislation to allow for future regulation of the buy-to-let market – this has been long heralded and probably makes sense, but its possible shape and the timing of such a change just adds to the uncertainty.

In terms of the nation’s SMEs, the Chancellor needs to review how smaller businesses will deal with forthcoming economic uncertainty due to Brexit turmoil. Our business savings research found that SMEs have remained cautious, building up their cash reserves at a time when we want to see investment in growth. We want to see the Chancellor supporting growth and investment, as this in turn will drive future tax revenues.

Business rates are one of the biggest costs our SMEs face and their payment forms a critical part of financial planning. We hope the Government’s business rate review brings more clarity on future business rate reform. In order to encourage SMEs to invest in their businesses in 2016, we need a period of steady economic growth and a context of increased certainly over the future business landscape. Less taxation and red tape is crucial to ensure both companies and consumers invest in their futures.

This was posted in Bdaily's Members' News section by Hampshire Trust Bank .