Autumn Statement 2016: Weaker economic growth paints gloomier picture for occupier demand

AS 2016: Weaker economic growth paints gloomier picture

Andy Pyle, UK Head of Real Estate at KPMG, comments on the real estate focus in the Autumn Statement.

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Andy Pyle

Andy Pyle, UK Head of Real Estate at KPMG, commented: “The Autumn Statement did not point to any major changes that would turn the commercial real estate market on its head - as expected, the focus was more on residential housing. Despite the commercial real estate market picking up since the Brexit-vote, the deterioration of public finances and lower forecast economic growth paints a somewhat gloomier picture for occupier demand which underpins the market. This is likely to continue until we have more certainty around what Brexit will actually mean in practice for the UK.

“Regional investment into infrastructure, housing and business innovation featured heavily in the statement, and the additional focus in these areas will act as an enabler for real estate more widely in the long-run. For example, the £1.8bn being ploughed into Local Enterprise Partnerships (LEPS) or the £1bn set to be spent on the roll-out of full-fibre connections and future 5G, will both improve the infrastructure in cities across the UK and will subsequently prompt investors to look beyond London. Running in parallel, the focus on making the UK economy more innovative and productive should make the UK an attractive place for businesses and their skilled employees, which in time should help to support occupational demand for commercial real estate.”

“The Chancellor focussed heavily on transport and digital infrastructure, as well as the need to build more homes – particularly affordable homes.  The commercial real estate industry has a key role to play in helping the government regenerate our cities and provide great buildings – whether offices, shops or warehouses – and these are just as important as economic enablers as new roads and telecommunication networks.  It is critical that the Government maintains the UK as an attractive place for investment in real estate, particularly given the choice investors are presented with globally.”

Commenting on the potential tax changes for investors, Stuart Secker, UK Head of Real Estate Tax at KPMG, added:

“The announcement that the Government will consult on taxing income of non-UK property investors under corporation tax, rather than income tax, is perhaps not wholly surprising. The benefits to investors of a lower tax rate may well be offset by the earlier tax payments that would be due, as well as the broader swathe of tax legislation that they would have to comply with. The big question is whether the Government will be tempted to apply this to capital gains as well as income - that would be a game changer for the industry.”

-Ends-

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For further information please contact:

Simon Wilson, KPMG Corporate Communications

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KPMG Press office

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About KPMG

KPMG LLP, a UK limited liability partnership, operates from 22 offices across the UK with approximately 12,000 partners and staff.  The UK firm recorded a revenue of £1.96 billion in the year ended September 2015. KPMG is a global network of professional firms providing Audit, Tax, and Advisory services. It operates in 155 countries and has 174,000 professionals working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity.  Each KPMG firm is a legally distinct and separate entity and describes itself as such. 

Autumn Statement 2016

Autumn Statement 2016

The Autumn Statement took place on 23 November. KPMG's coverage is available from this hub.

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