Having been relatively unknown before taking the seat of Chancellor of the Exchequer, Rishi Sunak is proving to be an active Chancellor and thank goodness for that.
Along with a number of other European countries, the UK government successfully put most of the economy into a state of ‘suspended animation’. The cost of doing this has been colossal, so I’ve been reassured by his comments that continued extensions of the furlough scheme won’t be the approach moving forward. Equally unhelpful is having a cliff-edge to what has been a lifeline for many businesses and individuals.
To that end, we believe the job retention bonus and kick-starter job creation scheme are good bridges for companies to help people out of furlough.
In the absence of a vaccination programme, we see continued risks and the Chancellor’s initiatives rely on a lot going right over the next few months with the government’s handling of the virus.
Today’s measures will encourage many businesses to reopen and while consumer behaviour (and businesses) adjust to the new normal, the assistance with employment costs in the job schemes alongside the VAT cut for food, accommodation and attractions will provide an additional cushion. This doesn’t mean the hospitality sector is out of the woods just yet, but the outlook for these companies will have improved.
In the case of high street retail we think the prognosis is different. The sector was dealing with rising competition from e-commerce and the crisis has accelerated that trend. We don’t think the high street is going to look the same again any time soon. That also means the outlook for commercial property with a retail focus is equally at risk. However, if consumers have recognised one thing during the crisis, it has been the importance of community. It might be that the high street returns with a much richer shopping experience from local vendors of local produce, selling to their local communities.
The other big announcement was for property buyers and home builders with a reduction in stamp duty. These are welcome schemes to help the sector moving again although there is a chance that demand will recover unevenly as properties with outdoor spaces are much more likely to be sought after. This might see central London residential property underperform on a relative basis. There were also green energy efficiency initiatives launched which should be helpful for homeowners and landlords. However, both of these moves rely on job security and confidence.
Overall, these are a welcome set of targeted measures. The big question, of course, is whether all this will be enough to get the economy moving.
Looking forward, all eyes will be on the Autumn budget. This is when the Chancellor will provide details about the government’s spending plans and priorities; how they will level up the country; how the economy is going to be steered through Britain’s exit from the transition period with the EU; and just as importantly how we are going to pay for all this spending.