Conservative Manifesto: Industry reacts

By Paul Norman - Thursday, May 18, 2017 15:30

The property industry has been digesting the Conservative Party’s manifesto "Forward, Together: Our plan for a stronger Britain and a prosperous future" and its implications for commercial property. CoStar News reviews the initial thoughts.

Among a range of policy commitments pertinent to UK property the manifesto maintains the party's pledge to cut corporation tax to 17% by 2020, promises to reform business rates, with more frequent revaluations, and pledges to exit the European single market and customs union but seek a "deep and special partnership" including a comprehensive free trade and customs agreement.

Responding to the manifesto, Lewis Johnston (RICS Parliamentary Affairs Manager) said the immigration target must not restrict access to the skilled construction workforce Britain needs: “Today the Prime Minister made it clear that her Government intends to reduce net migration to the tens of thousands. Whilst this was included in the last Conservative Manifesto, against the backdrop of Brexit it is now a statement of intent with renewed vigour. The concern is that such a target will take no account of the need for skilled workers – we must not sacrifice the needs of the UK construction sector for the sake of an arbitrary target.

"Currently, 17% of the UK’s construction workforce were born outside of the UK, and it is a recurring concern across the built environment sector that excessive restrictions on immigration could jeopardise the delivery of the housing, infrastructure and construction projects the UK badly needs. The skills issue is even starker in the context of Brexit. Recent RICS figures showed that 8% of the UK construction workforce comes from the EU leaving 176,500 construction jobs at risk should we lose access to the single market without alternative plans. This could jeopardise a predicted £500bn pipeline of projects.

"The Conservative Manifesto rightly emphasises the importance of technical education and training to boost the capacity of the domestic workforce, but this is a medium to long-term measure – companies need assurances that they can access the skills they need now to ensure the health of the UK economy.

"It is encouraging that today’s manifesto acknowledges this, and commits to working with the Migration Advisory Committee to better align our visa system with the needs of our economy. However, the Immigration Skills Charge levied on companies employing migrant labour has been doubled to £2,000 – not a policy to reassure employers worried about the consequences of Brexit on the skills shortage – especially when 8% of construction workers are EU nationals. Our election document Priorities for the Built Environment calls on all parties to commit to an immigration system that helps not hinders the movement of skilled construction workers.”

On the housing initiatives RICS said: "Elsewhere the manifesto reiterates the commitments set out in the Housing White Paper, with an explicit acknowledgment of the role of social and council housing if we are to meet housing need. This is a positive step – we need a housing policy that drives up supply across all tenures and doesn’t just focus on home ownership."

Jerry Schurder, head of business rates at Gerald Eve, reacted angrily to the announcements around rates: “Firms will roll their eyes at the prospect of yet another structural review. They have given their views on business rates over and over again – at least five times since 2013 – and it’s high time this information was acted on. Companies don’t need more consultation, they need genuine reform of the rating system and they need it now. Another talking shop review only delays the implementation of much-needed changes.

“Throughout numerous consultations, UK plc has been united in its calls for reforms to create a system that is fair and supportive of investment: greater equality between online and bricks-and-mortar retail; a road map towards a tax take that changes in line with economic circumstances; more frequent revaluations; VOA transparency; and a fair and speedy appeals process.

“In its manifesto, the Conservative Party has committed to just one of these reforms, and even that has been previously announced. The 2016 Spring Budget promised more frequent revaluations, but in the 16 months since virtually zero progress has been made beyond the publication of an apparently-ignored discussion paper. Businesses will hope the inclusion of the policy in the manifesto means it will actually be implemented speedily, and not just kicked into the long grass like so many times before.

“Gerald Eve acts on over 90,000 properties, from sole traders to the largest conglomerates, and the prevailing mood among nearly all firms is anger at the unfairness and burden of the business rates system. Only positive action will dissipate this anger; without reform, the Tory’s reputation as ‘the party of business’ will lie in tatters."

The British Retail Consortium (BRC) said the manifesto had some sensible starting points but questions had been left unanswered.

Helen Dickinson OBE, chief executive of the British Retail Consortium said: “There are some sensible starting points ahead of a transformational journey, but there are questions left unanswered.

“There is much more work to be done to drive innovation, productivity and new skills in a changing world. The retail industry will work with the next Government to build a fair Brexit for consumers and a pioneering economy.

On the economy Dickinson said: "We welcome some positive initial steps forward in fixing a broken business rates system that is a drag on innovation and UK high streets. It’s right to acknowledge the importance of more frequent revaluations, however, it is important that independent valuations of properties continue to take place to ensure a fair, robust and efficient system.

"A full review of the business rates system is essential and the next Government must put in place a system for the 21st century that does not pit online against offline or large against small. We will seek further clarify from the next Government to try to bring forward the switch to CPI indexation forward to April 2018, followed by a lower flat rate beginning in 2020.

“The ‘people agenda’ is front and centre of the retail industry. On wages, it is important the Low Pay Commission retain their independence and recommend pay increases that are manageable for the whole economy. Retailers support the National Living Wage and continue to work hard to raise pay across the industry but increasing pay without considering wider economic conditions is unsustainable.

“Retail businesses employ a variety of different models to ensure the views of their workforces are heard by their board. Strengthening this voice is a positive step to support employee engagement and productivity but there must be flexibility in how individual businesses do this in practice.

“The additional costs of proposals to increase the charge on users of the Tier 2 system represent a challenge for retailers but should this charge be applied. We will work with the next Government to direct the resulting revenue to ensure the UK can close existing skills gaps.

“The commitment to provide £740m of investment for digital infrastructure through a new National Productivity Investment Fund is a welcome step and should the plans go ahead, the funding should be directed towards ensuring existing 3G and 4G technology is rolled out across the UK and accelerating the uptake of future generations of digital technologies.”

On Brexit Dickinson said: “We welcome the commitment to a new Trade Bill, which we hope will fill the regulatory vacuum of post-Brexit trade. In order for this bill to be effective, the next Government must work with businesses to ensure the best possible future trading environment is achieved.

“It’s right that the UK replicate all existing EU free trade agreements. Ensuring that consumers continue to enjoy great quality, choice and value on goods depends on a continuation of tariff-free trade on all products traded between the UK and the EU. Whether through reaching a new trading relationship quickly or securing a transitional arrangement, we will seek to make sure this is at the heart of plans for a smooth and orderly Brexit.

“Employers throughout retail must be able to secure their current workforce and fill vacancies in the future. It’s crucial that the next Government secures the rights of EU nationals living and working in the UK at the earliest possible opportunity during the withdrawal negotiations with the EU.”

Analyst Jefferies said the Conservative Party's Manifesto had the least to say on housing of the big three UK political parties which is "surprising given Housing White Paper published 7 February 2017 was called 'Fixing our broken housing market'".

It writes: "All three parties are in agreement that the way to fix the housing market is to build more homes, although none of them have explained where the skilled workforce to build these additional homes will come from.

"The Conservatives are proposing a new form of tenure - a fixed term social home, which can be sold privately after 10-15 years, with automatic Right to Buy, with proceeds being recycled into further homes. Our concern here is that the manifesto does not suggest that these homes have to be replaced and there may therefore be an ongoing shortage of social housing, especially if homes are sold at a discount to market value under Right to Buy.

"Speeding up build may actually slow it down The Conservative manifesto, like that of the Liberal Democrats wields a stick to those that build homes too slowly, a type of use it or loose it policy. Our view remains unchanged, any policy which increases planning risk is likely to reduce rather than increase supply."

It adds: "The Conservatives were virtually silent on the needs and aspirations of the one in five living in the Private Rented Sector. No rallying call to confirming desire to ban tenant fees, no call for rent controls and no call for longer tenancies. It seems to is that not many Conservative election flyers will be posted through the letter boxes of the Private Rented Sector.

"Given the recent White Paper we are surprised by the limited commentary on housing in this manifesto. It seems to us that the manifesto most supportive of housebuilders is Labour's, most supportive of renters is the Liberal Democrats' and most supportive of estate agents the Conservatives', with housebuilders having most to fear from the Conservatives."

Commenting on social care proposals in the Conservative manifesto, James Kingdom, Head of Research for JLL’s Alternatives team, said: "The increase in the threshold for public pay care to £100,000 is to be welcomed. The current level has been unchanged since 2010 and is no longer applicable to the majority of elderly households.

"However, this may merely be a fig leaf policy if there is no fresh new funding accompanying it. This move alone will do little to remove the continued pressure felt by operators reliant upon local authority income. Rising staff costs remains major challenge and the move to more deferred payments will fail to bring any additional cash flow when it is most needed.

"It is also vital that the next government provides the conditions for a range of elderly accommodation options. Housing with care provides a clear pathway for the elderly and will help take the pressure off care homes. With over 65 s set to reach 25% of the population within a decade, this issue needs urgent attention as one of the biggest challenges facing older people is a complete lack of appropriate housing choices to suit their lifestyle, care or support needs as they age. Those still reliant upon self paid care will still need good quality care providers and high quality real estate whether care homes or housing with care."

Duncan Field, UK head of planning at global law firm Norton Rose Fulbright, said: “Given that the Government’s white paper was published so recently, there is little room for new ideas in the manifesto. However what we do have is a little more insight into the role which local authorities might expect to play in delivering new homes through the concept of Council Housing Deals: there is the promise of additional resources and low cost capital funding to aimed at a delivering a new wave of fixed term social housing linked to the right to buy.

"This recognition of the importance of public sector house building should be welcomed but the link to right to buy does give cause for concern that this will translate into a short term fix without resolving the long term problem with the supply of affordable homes in this country. We also have very broad brush references to land value capture as a means of funding local infrastructure but this is a complex area and is likely to take years to come to fruition.

“Another point of interest is the nod to the future role of digital technology in the planning system and the transformational impact that this could have on local planning services and the way people interact with them; this will presumably build on work that it already being co-ordinated by Future Cities Catapult.”

Sarah McMonagle, Director of External Affairs at the Federation of Master Builders (FMB), said: “The importance of addressing the country’s chronic shortage of homes is as great as ever, and the Conservative Party’s manifesto seems to appreciate the scale of the challenge ahead of us. A revised house building target of 1.5 million homes from 2015 to 2022 ups the ante on housing delivery again, but these ambitions can only be delivered with an accompanying focus on creating a more diverse and innovative house building sector. The decline in the number and output of smaller local house builders over the past few decades has led to the industry’s capacity haemorrhaging. To deliver the PM’s vision we will need to reverse this. The Manifesto’s explicit pledge to diversify the delivery of new homes is therefore extremely welcome. Key to doing this will be being able to build on some of the sensible reforms outlined in the recent Housing White Paper, which we hope to see implemented.”

McMonagle concluded: “The Conservative Party’s manifesto sets out an ambition not only to build more, but to build better. There is a welcome emphasis on balancing the pressure for increasing the delivery of new properties with the need to deliver those homes to a high standard. As is widely recognised, smaller scale house builders have a strong focus on quality. By supporting greater diversity in terms of the companies building our new homes, a Conservative Government would be killing two birds with one stone. This is a vision that SMEs can build on."

Deepa Deb-Rattray, partner at Berwin Leighton Paisner, said irrespective of which party secures the majority to win, the new Government will need to "seriously consider the reality of the housing predicament" in the UK.

“It is clear that home ownership is slipping out of reach for most, housing costs are prohibitively expensive, more families are renting but the quality of what is available to rent varies hugely and homelessness is on the rise," she said.

“The Government will need to illustrate its awareness of shifting cultural and generational trends. Whether it is Generation Rent or the differing needs of the Grey Pound, clearly the emergence of the build to rent sector and the rationale for the same will need to be taken seriously. The hope is that the new Government will introduce the necessary taxation and planning changes required to unlock much needed investment into the housing market.

“It is an easy win for the political parties involved in the race to differentiate themselves by having clear, measureable and achievable housing crisis resolution policies because this issue pervades class, region, ethnicity and gender – we all need and deserve to live in quality accommodation that we can afford,” Deb-Rattray said. 

pnorman@costar.co.uk

Get in Touch
+44 203 205 4600