Budget reaction

Thursday 31 October 2024

David Taylor

Editor, NLQ and New London Weekly

Nick Bowes

Managing Director (Insight)
London Communications Agency

James Ryan

Director
Drees & Sommer

Damian Wild

Managing Director
ING Media

Oana Gavriliu

Principal
Hassell

Jay Morton

Director
Bell Phillips Architects

Stevan Tennant

Managing Director Development
Ballymore

Pierre Wassenaar

Director
Stride Treglown

Will Matthews

Head of Commercial Research
Knight Frank

Melanie Leech CBE

Chief Executive
British Property Federation

Keith Cooney

Head of Business Rates
Knight Frank

Cllr Claire Holland

Chair
London Councils

Martyn Evans

Creative Director
Landsec U+I

Dee Corsi

Chief Executive
New West End Company

A group of invited NLA members and commentators have delivered a broadly upbeat reaction to yesterday’s Autumn Budget from Chancellor Rachel Reeves.

But while some praised the positive push given to get Britain building and ‘fix the foundations’ with an emphasis on housing – particularly affordable – and infrastructure, others warned about the dangers of quantity over quality.

And while a degree of support for local authorities, planning, schools, health, retail and leisure was welcomed, some felt that the government had gone ‘property-light’, had not been bold enough or gone as far as necessary, and that there had been precious little commentary on carbon, innovation or viability.

The devil, as ever, will be in the detail.

The full reactions are below:

Nick Bowes, Managing Director, Insight, London Communications Agency:

‘Keir Starmer’s promise to end the London bashing was certainly reflected in the tone of the Budget. But on the substance, it’s a mixed picture for the city. Hefty increases in National Insurance won’t help with the cost pressures facing developers in London, and while there’s some relief for hospitality with tweaks to Business Rates, the commitment to fund this through higher rates for valuable properties looks ominous for central London. Good news that HS2 to Euston goes ahead, but no funding for a wider rebuild of the station – instead, a Housing Delivery Group will look at how to regenerate the area. TfL gets a one-year funding deal to help pay for the new Piccadilly Line trains, but the Mayor will be disappointed there’s nothing for the Bakerloo Line Extension, West London Orbital or Docklands Light Railway extension. More money is going into housing delivery but London’s share of this is unclear. Angela Rayner describes this as a ‘downpayment’ ahead of the Spending Review – a good way of describing this Budget more generally. Next Spring’s Spending Review now looks increasingly important when it comes to London’s big-ticket items, and they’ll be a lot of lobbying in the coming months.’

James Ryan, Director, Drees & Sommer:

‘The numbers always sound big when you’re talking about the public finances but £40 billion of tax increases to support public services is certainly eye-catching and reflects just how much strategy has changed with the arrival of the new government. In general, we welcome talk of a commitment to increased investment in public services and particularly capital investment. The funding crisis in local government has touched many parts of the country and with challenges such as decarbonising homes and increasing social care requirements, there is simply no getting away from the fact more support needs to be made available. The foreshadowing of this budget focused on getting the UK building again and £5 billion to deliver the housing plan sounds like a step in the right direction. Increases in the Affordable Homes Programme to £3.1bn and providing £3bn worth of support and guarantees to increase the supply of homes and support small housebuilders are also welcome and we keenly await information on the timings for these funds. We also really welcome the increased commitment to DfE funding as a business that has a strength in education and personally, I feel long-term investment in further education will be beneficial to solving the construction skills crisis.’

Damian Wild, Managing Director, ING Media:

‘Winners and losers. Praise and condemnation. Finger-pointing and point-scoring. In many ways this was a typical Budget. In many more, it was not. The first delivered by a female chancellor. The highest tax-to-GDP ratio on record. The most present participles dangled. If the first weeks of the new government had been dominated by this sector’s agenda, this was a Budget that was property light. Business criticism of last month’s Labour party conference was borne of other sectors’ neglect. For real estate – so often ignored by government – it was a rare moment in the sun, with housing and other infrastructure recognised as mission critical. Yesterday was different. Tax rises angered property’s entrepreneurs. Tinkering with business rates satisfied nobody. At least more power to mayoral elbows contained nothing to dislike, and I’m sure I heard some Hallelujahs in response to Reeves’ infrastructure investment commitments. Oh, and there was no repeat of the (not-so) great gilt market meltdown of 2022. Phew. All eyes now turn to the MPC meeting on 7 November. A quarter-point cut is expected and as one wise head told me recently: “You tell me when and by how much interest rates will be cut, and I’ll tell you market sentiment in 2025.”’

Oana Gavriliu, Principal, Hassell:

‘The NHS is without a doubt one of the winners coming out Labour’s first budget in 15 years.

The headline grabber? An additional £3.1 billion in capital investment, nearly an 11% annual increase. Although this falls short of the additional annual need of around £6bn, for those of us in healthcare design and construction, this commitment is a good signal that infrastructure upgrades are being prioritised. In particular, it is reassuring to see waiting lists and times being addressed with investments in more new surgical and diagnostic centres and expanded A&E capacity. These are tangible, meaningful steps toward a more resilient NHS that can meet rising demands.

Of course, clarity on the New Hospital Programme’s funding and timeline is still forthcoming, so we continue to wait for that update. But it’s clear that the three-pronged shift Lord Darzi championed – analogue to digital, hospital to community, and sickness to prevention – is starting to materialise. We’re seeing this in capital investments earmarked for community, social care and mental health services, investment in technology and digitalisation and a focus on tackling obesity and tobacco addiction in all forms.

While this budget sets the NHS on a promising path, the real test will come when the New Hospital Programme review wraps up and we get the full scope of the NHS 10-Year Plan in March. But for now, there’s plenty to be hopeful about.’

Jay Morton, Director, Bell Phillips:

‘The Budget continues Labour’s conference promise to “fix the foundations,” get Britain building, and prioritise infrastructure, bringing much-needed stability to the construction sector. While some were cautious in advance, the ambition to build and improve planning processes is reassuring and will add to stability.

It’s great to see housing at the forefront, especially affordable housing. With policies like the retention of Right to Buy receipts and the increase in the Affordable Homes Programme, there’s hope that local authorities will start building again, reversing the rapid decline we’ve seen in recent years. Yet only £500 million is dedicated to new social housing projects. While this signals a commitment, it raises questions about whether this amount is enough to deliver the quality and standards the public sector deserves. Social housing should set a benchmark for excellence in design and construction, ensuring homes are not only safe and affordable but also well-designed spaces that enhance community life.

Whilst there was discussion on innovation to reduce carbon emissions, there was little mention of carbon in relation to construction. Carbon capture alone won’t solve the problem. Innovation in construction is essential to meet green ambitions, especially given that embodied carbon in building materials and construction accounts for a substantial portion of the industry’s emissions. Without targeted support for sustainable construction practices, meeting the UK’s climate goals will be challenging. Addressing these emissions directly through innovation in materials, design processes, and construction methods is critical.

Overall, this Budget signals a positive direction for the construction sector. The drive to build is refreshing compared to the last 14 years, with a focus on fixing the current issues and building the much-needed housing and infrastructure that the country requires. Investment in jobs and transport will also unlock new locations and opportunities for housing delivery. In a way it’s a Budget for placemaking, but the challenge remains: is it enough?'

Stevan Tennant, Managing Director, Development, Ballymore:

‘It was encouraging to see investment ring fenced for affordable housing in today’s Budget. But the Government needs to go further and reconsider taxation measures to ensure that the residential property sector is incentivised, rather than stifled.

The cost of building affordable housing in London excluding land is significantly higher than the value Registered Housing Providers are willing (or able) to pay for these homes. This effectively means affordable housing becomes a tax on development, and there is no financial incentive for a developer to build affordable housing.

We are in danger of being distracted by conversations about a myriad of other factors that may impact on housing delivery, but at the core of the issue is viability, the cost of home ownership and funding and how it can be used. With costs rising dramatically and development values decreasing, many projects are simply no longer viable. Ultimately, we need to be building more homes across the country, at all levels of the market and all tenures, but developers cannot deliver them if it’s not financially viable to do so.’

Pierre Wassenaar, Chair, Stride Treglown:

‘Whilst a hike in the cost of running the business is never ideal, we had already accounted for the increase in employers’ NI contributions - one of the advantages of the Budget being so heavily trailed!

We’re optimistic about the focus on encouraging investment and the willingness to change rules to do so. Unlocking funds that are to be spent on new homes, and upgrading schools and hospitals is to be welcomed. The various announcements of additional money that were made in advance were seemingly designed to get confidence rising so we're optimistic that we'll see this translating into project activity over the coming months.

But we do also need to be aware of unintended consequences: an emphasis on speed and quantity over quality or so much focus on housing that all other sectors are forced out, not the recipe for thriving and sustainable communities. I hope the plans are well thought through enough to account for these - and a whole range of other - potential outcomes. Only time will tell.’

Will Matthews, Head of Commercial Research, Knight Frank:

‘Most developed economies face some version of the UK government’s uncomfortable challenge. Whether by accident or design, the UK again finds itself at the head of the queue for a dose of tough medicine. It’s a bruising process, but some health benefits are immediate: fiscal clarity, an emergent industrial strategy, and a real basis on which to make long-term investment decisions. This was a momentous budget, in scale, significance and severity - but given the anticipation, an event perhaps lacking a true element of surprise. That was certainly the assessment of the bond markets, which largely it shrugged off.

For commercial real estate, a few themes stand out. First, the government’s supply-side push majors on infrastructure investment. We need to see the detail, but we can expect a positive impact for commercial development.

Second, the ‘Get Britain Working’ campaign, at the margin, could boost employment and increase demand for employment space, but we’ll be alive to any counter impact from higher minimum wages and higher employer National Insurance contributions.

Finally, the changes to carried interest and the end of the non-dom regime will be felt but do not disadvantage the UK versus other G7 economies.’

Melanie Leech, Chief Executive, British Property Federation:

‘With no concessions on the overall business rates burden today’s announcements on this are just robbing Peter to pay Paul. However, the Chancellor has at least recognised the business rates system is broken and has signposted the direction towards a reformed system. In the meantime, recognition of the unsustainable burden on retail, leisure and hospitality sectors and measures to continue to support them are welcome, but alongside the employer tax increases announced don’t go far enough to provide our high streets with the protection they need today.

Measures to support the delivery of more homes are welcome but the Chancellor knows that much more is needed if the Government is to deliver on its 1.5 million homes pledge. The promised housing strategy needs to be much bolder and go much further. This includes unlocking the billions of pounds of investment into the build-to-rent sector, so it is particularly disappointing that Rachel Reeves did not take the opportunity to reverse the previous Government’s decision to abolish multiple dwellings relief announced in Spring.’

Keith Cooney, Head of Business Rates, Knight Frank:

‘Today it was revealed that despite a change in Government, the £29 billion business rates tax burden is set to increase again for 2025 with the largest ratepayers – which will include the country’s key employers – being asked to effectively fund any support for SMEs.

Despite pledges to support the high street the Chancellor has cut the business relief for retail, leisure and hospitality from 75% to 40% albeit retaining the cap of £ 110,000 per business. Moreover, the move to fund a reduction in the multiplier for retail, leisure and hospitality from 2026/7 with a higher rate targeting warehouses, is shortsighted as Government is effectively taxing the infrastructure that these businesses rely on to move goods to their premises and directly to the consumer.

This all adds even more complexity to an already highly complex system, and simply shifts the tax liability without acknowledging that the tax burden on UK businesses is simply too high. It is difficult to see how these measures will help fix the foundations needed for economic recovery.”

Cllr Claire Holland, Chair, London Councils:

‘We went into this Budget warning of a homelessness emergency that is devastating Londoners’ lives and pushing boroughs to the brink of bankruptcy. The measures announced by the Chancellor to support local homelessness services and boost housing growth are hugely welcome, alongside the additional investment in SEND and social care.

While the Budget will help to address some of the immediate pressures we face, the outlook for borough finances remains extremely tough after 14 years of structural underfunding. We will continue working with ministers to address the significant financial challenges we face in local government and maintain vital local services.

Next year’s Comprehensive Spending Review will be a crucial opportunity to ensure London boroughs have the resources we need to be an effective partner to national government over the coming years and help to drive growth across the capital.’

Martyn Evans Hon FRIBA, Creative Director, LandsecU+I:

'Our new Government has been relentless in its focus on policies to encourage more successful development, including the quality of places we, as developers, make. Angela Rayner’s team has shown significant progress in areas like planning reform and industrial strategy. And yesterday’s Budget brought more positive news, including increased funding for affordable housing. As a significant investor in sustainable communities, Landsec supports the Government’s ambitious goals for growth and housing delivery.

Our hope for more infrastructure investment in the next Spending Review and further recognition of the pivotal role that public/private sector partnerships will have in creating the vibrant, characterful places that the Deputy Prime Minister and Chancellor want to see more of.'

Dee Corsi, Chief Executive, New West End Company:

‘The Budget was a crucial opportunity to unlock the economic potential of the UK’s retail, hospitality, and leisure sectors. However, the pro-growth measures promised to businesses before the election are notably absent.

For our members in the West End, this Budget appears to add to, rather than alleviate, financial pressures. Retail, leisure, and hospitality providers now face a steep increase in National Insurance for employers, coupled with the upcoming rise in the National Living Wage, both of which could hinder future job creation and investment in these essential growth sectors.

The government’s business rates discussion paper is a positive start, but it’s crucial that any reform does not inadvertently impact retail, hospitality, and leisure businesses in high-value areas like the West End. The proposed multiplier increase for properties with a rateable value above £500,000 risks placing additional strain on these businesses, which are already key contributors to the UK’s economy. Operating costs in the West End are already inequitable and significantly higher than in other areas, making it far more challenging for businesses here to thrive.

Therefore, we must go further to unlock the full growth potential of the retail, leisure, and hospitality sectors. We urge the Chancellor to work closely with industry on swift and comprehensive business rates reform and to establish a national tourism strategy with the return of tax-free shopping as a central pillar.

Policies like these, if implemented thoughtfully, would not only revitalise the UK’s economy—enabling businesses to invest, expand, and create jobs—but would also enhance the country’s competitive edge globally, driving vital inward investment.’

Boroughs will have a clearer picture of the financial challenges they face for 2025/26 once the distribution of the additional grant funding announced is confirmed and the Local Government Finance Settlement is published in December.

Other key measures announced in the Budget relevant to London boroughs include:

A £1 billion funding uplift to reform the system for school pupils with special educational needs and disabilities.
£600m in additional grant funding for social care.
More certainty on social rent levels, with rents to rise by CPI +1% for five years.
£500m additional investment in the Affordable Homes Programme to boost housebuilding.
Reforms to the Right to Buy scheme to allow councils to retain 100% of receipts to invest in building new council homes.