The battle against Coronavirus
Newly appointed chancellor Rishi Sunak has delivered his first budget announcement which set out the Government’s fiscal plan for the coming year. As expected, infrastructure was the main event of the spending plan. So too was the mitigation of Coronavirus pressuring health services and businesses. Sunak pledged a £5bn emergency response fund to support the NHS and English public services. This was part of a wider £30bn package which will boost the economy. The expenditure is expected to be a good thing for Sterling alongside the other measures laid out for British business.
Hikes and cuts
As was expected in the run up to the budget, Stamp duty tax was raised by 2% for overseas buyers to the UK. This hike come four years after the introduction of a 3% surcharge on buying a second home and buy to let properties. Analysts for the housing market have said that most overseas buyers would have to pay both charges. As for the foreign investors themselves, their currency and exchange needs will shift once this duty comes into effect in April next year. Will Stephenson, relationship manager at leading FX specialist Privalgo gave his thoughts on what it means for his own clients, and overseas buyers hoping to purchase in the UK.
“With this hike in fees, we expect that to affect 70,000 of the UK’s 1.2 million annual property transactions. So saving a significant amount on funds on currency transfers has become increasingly more important.” – Will Stephenson, Privalgo
The planned Corporation tax was scrapped however entrepreneurial relief has been dropped from £10m to just £1m. The idea being that this will save £6bn over the next five years. Sunak said this would not affect 80% of small businesses however there are arguments that the relief itself is a failed policy and doesn’t actually help or become accessible to, the majority of entrepreneurs.
Elsewhere at the Treasury, interest rates were cut to 0.25%. The lowest in history. Outgoing Governor Mark Carney said the bank would free up billions of pounds of lending power to help banks support firms who may be suffering in light of Coronavirus. This move had been anticipated as the first decisive decision of Carney’s successor, Andrew Bailey. Bailey was in attendance as Carney addressed the issue and outlined the BoE rate cut plan.
Meanwhile in America
Across the pond, Donald Trump took extreme measures by instigating a travel ban on Europe but not the UK. In a speech which saw him repeatedly refer to “this foreign virus” there was no clear plan laid out for America except the strict ban which also mistakenly included a ban on goods. Something the President had to roll back on Twitter that same evening.
Trump’s statement has seriously affected markets with Australia down 7.5% and the UK also falling by 5%. The UK is expecting an annual growth of 1.1%. The slowest since 2009.
An outline of what the budget covered can be found below:
- Business rates – Retail, Leisure and hospitality firms with business rates below £51,00 will see that figure abolished.
- Small business relief – Small firms will be able to access “business interruption” loans of up to £1.2m
- UK Borrowing rates – Government to borrow £14.6bn more this year than previously forecast.
- Broadband boosts – A £5bn spend on Gigabit broadband for hardest to reach areas of UK
- Pub tax – Business rate discounts for pubs to rise from £1,000 to £5,000 this year
- Plastic tax – Manufacturers and importers with products made from less than 30% recyclable material will be charged £200 per tonne