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Budget, Bricks, and Books

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The last Spring budget   ‘I report today on an economy that has continued to confound the commentators with robust growth’ commenced the Chancellor, as he announced ‘the spreadsheet bit’ to his first and last Spring Budget. Key takeaways include: a growth forecast of 2.0% (up from OBR’s 1.4% in November); an inflation forecast of 2.4% (2017); a reduction in corporation tax to 17% by 2020 (remembering that in 2010 it was 28%); a focus on productivity (currently 35% behind Germany) through investment in training and infrastructure; and taking a lead on disruptive technologies such as ‘biotech, robotic systems and driverless vehicles’ (the latter something Hammond said that Labour should know all about…). The speech included strong rhetoric on equality: ‘the broadest shoulders should bear the heaviest burden’, ‘a recurring concern for the next generation’ and ‘an economy that works for everyone’. Jeremy Corbyn disagreed, citing ‘utter complacency about the state of our economy’.

Civic Housebuilding The housing and homelessness charity, Shelter, has published a report calling for a move to ‘New Civic Housebuilding’, which it sees as the antidote to ‘Speculative Housebuilding’, which it in turn blames for the housing crisis. The report identifies that the biggest challenge to delivery is often land pricing, and highlights questions about who should participate in land value uplift. It suggests that the land should be acquired by the public sector at existing use value ‘plus a degree of compensation’ rather that at ‘speculative’ prices, and recommends changes to compulsory purchase legislation to allow for this. This proposal will not be popular among landowners. However, as the report notes, where value is unexpectedly created through, for instance, the designation of a New Town, then there is a perhaps a stronger rationale that landowners should not benefit from a windfall at the expense of the scheme which creates that value. The proposals also chime well with Theresa May’s intention of ‘using the power of government to step in and repair the dysfunctional housing market.’

Scottish merger Last week Warren Buffet’s annual letter made a number of pointed comments about the pressures facing active managers. This week, we see a significant response from two key players in the industry. Standard Life Investments (SLI) and Aberdeen Asset Managers (AAM) have announced an all share merger, which propels the combined entity into the super-league of global fund managers (over £660bn under management). Citing a ‘compelling strategic and financial rationale’ for the merger, the tie-up is designed to bring scale and diversity, and £200m of annual synergies. Real estate investments will account for some £33bn (c.6%) of funds under management.

Dyson hoovers up  Dyson has acquired 517 acres from the MoD just off the M4 in Wiltshire, where it plans to deliver a new R&D facility and potentially a large manufacturing plant. An ardent Brexit campaigner, James Dyson cited ‘currency movements, corporate tax, and tax relief on inventions’ as much more compelling than any detractions arising from Brexit. Dyson is now one of the UK’s biggest landowners, with a portfolio of over 25,000 acres. He is rumoured to be moving into batteries and autonomous cars – both significant growth areas. Theoretically, the Wiltshire site is big enough to compete with Tesla’s ‘Gigafactory’ in Nevada. The biggest building in the world, completed last year, is a massive 5.5m sq ft, built with the aim of doubling annual global battery output. Elon Musk is believed to be looking for a site for a European Gigafactory this year.

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Richard Pickering, Head of UK Research & Insight.

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