14. Weekly Newsletter

UK Commercial Property Dealmaking Rises

In the first quarter of 2023, investors pumped £6bn into UK office, retail and industrial buildings following record lows in Q4 of 2022. However, dealmaking is still equal to around half of its 10 year average- partially as a result of central London property declining in value and the cost of debt rising. 2023 has already seen several large deals such as Deutsche Bank’s Winchester House being sold to Malaysian investors (£257m) and Blackstone selling St Katharine Docks to a Singaporean group (£300m).

Asian investors represented three-quarters of all buyers (by volume) in London and were responsible for all deals over £100m. Noticeably, large deals typically came from all-cash buyers who took advantage of the strong dollar over the pound. Cushman & Wakefield described the results as demonstrating that “assets are now looking comparatively cheaper for overseas capital than they have done in recent years”. Current Q1 estimates suggest a 24% increase in activity since Q4 of 2022.

Newspapers & Council Elections

The UK’s front page news cycle over the last seven days has covered a wide range of topics with no singular domestic issue dominating the headlines. The challenges faced by the PM in dealing with the English Channel crossings and the ongoing strikes continue to gain media coverage. Additionally, the UK joining the CPTPP trans-Pacific trade bloc drew attention as an opportunity for ‘post-Brexit freedom’ despite the minimal impact it is likely to have on UK GDP. Some of the newspaper front pages over the last week were:

• Financial Times: Oil producers spring surprise output cut of more than 1mn barrels a day
• Independent Weekend: Biggest tax squeeze in 30 years for UK workers
• The Guardian: Families face £700 hit with wave of tax and price rises
• The Daily Telegraph: Households to face net zero penalty for gas use
• Daily Express: Fears Of Revolt Halt Pension Age Rise (to age 68)
• The Guardian: Government defies experts with huge gamble on carbon capture
• Daily Mail: Migrants To Be Housed On Cruise Ships And Barges

On the 4th of May, voters across most of England will be able to vote for their local and mayoral elections. In total 8,057 seats are available with the Labour Party expected to make strong gains. The Labour leader, Sir Keir Starmer, has stated he is “prepared to be ruthless” to ensure a Labour win at the next general election and has put forward a proposal to block the previous party leader from running in any future election. The vote will also set history as the first UK election which will require photo ID to vote (such as driving licences)

Corporation Tax Rises

UK companies face a main rate of corporation tax rising from 19% to 25% this week which is estimated to raise around £18bn for the Treasury. The additional revenue will be partially used to fund a 100% tax break on capital spending which is expected to boost investment and was announced by the chancellor in the Spring Budget.

Simultaneously, April also marked the government cutting the energy support package. KPMG has warned that the “starkest effect” will be experienced by businesses losing out on the energy support, facing a full 6 percentage point tax increase and those unable to benefit from full expensing of capital expenditure (such as the services sector). However, small companies with profits under £50,000 will continue to pay the 19% tax rate which proportionately rises to the full 25% tax rate applying to companies with profits over £250,000.