First post-Brexit Budget puts UK on borrowing and investment path
The first budget of Boris Johnson’s premiership signalled a move away from austerity.
Government plans to build up infrastructure and boost housing outside of London will create more opportunities for real estate investors targeting the UK. Rishi Sunak unveiled £640 billion of investment into road and rail projects, affordable housing, broadband and research, schools and hospitals over the next five years.
The chancellor’s budget signals significant increases in capital and spending. Sunak says borrowing as a percentage of GDP will be 2.1 percent this year, rising to 2.4 percent in 2020-21 and 2.8 percent in 2021-22 before falling to 2.5 percent the following year.
“Much of the emphasis on all the Budget spending announcements was about channelling funding into the regions to ‘level up’ the UK economy moving away from London-centric spending, policy and stimulus packages,” says Nick Whitten, head of UK Living research at JLL.
“A good proportion of it is either allocated to specific projects in the regions or is being handed to mayors of the big regional cities to allocate to projects themselves, which will prove attractive to investors.”
Power to the regions
In West Yorkshire, a £1.8 billion devolution deal includes creating integrated public transport networks and the redevelopment of Leeds station. For other regional cities, like Birmingham and Manchester, which already have elected mayors, there will be extra cash to develop the £2 billion Midlands Rail Hub plan, which wants to add an extra 24 trains an hour.
The increased spending on infrastructure like schools and roads will have positive knock-on effects for housing supply. “It should be the key to unlocking the door to building thousands of new homes across the UK,” says Whitten, highlighting how schemes can often fall down at the planning stage because the correct infrastructure is not in place.
Measures to boost innovation could also support the growth of businesses in the life sciences and technology sectors.
Sunak pledged to increase R&D spending to £22 billion a year by 2024-25 and offered an increase in the tax relief for companies carrying out qualifying research, up from 12 percent to 13 percent. Connectivity is also set to improve with £5 billion invested in gigabit-capable broadband.
Elsewhere, a £500 million scheme was announced to accelerate rapid-charging hubs for electric cars as part of a longer-term focus on ultra-low emission vehicles as part of the wider sustainability drive, while two carbon capture and storage clusters will create new jobs in the north of England.
Around 22,000 civil servants including those from the Treasury and departments of business and international trade, will also be heading north to an economic campus as part of plans to “change the whole mindset of government to make sure economic decision-making reflects the economic geography of the country,” according to Sunak.
While the regions are undoubtedly in focus in the wake of the swing over to the Conservative party in last year’s election, Jon Neale, head of UK Research at JLL, says that the scale of the Chancellor’s shift in spending focus must be kept in perspective; London remains the nation’s economic hub and needs its own infrastructure projects such as Crossrail 2.
Nevertheless, it could mark the start of a longer-term trend in regional investment, even if plans for this year are sent awry by the coronavirus pandemic.
“The message to our industry is clear: while London will continue to flourish given its inherent strengths, the opportunities in the rest of the country are likely to multiply,” adds Neale.