UK hospitality investors should look to the autumn Budget as the “defining moment” in providing more clarity on the new government’s direction, intentions and roadmap, and the impact that will have on the country’s investment landscape, according to a top political commentator.
Previous UK elections have been followed by a marked uptick in consumer confidence after election day, however business confidence has dipped following the Labour party’s success in the UK general election over the summer.
“Normally you have a clear sense of what’s coming, but that isn’t how it feels for this government”, said Robert Shrimsley, editorial director and UK political commentator of the Financial Times, speaking at the UK Annual Hospitality Conference (AHC) on 30 September at the Manchester Central Convention Complex.
Chancellor Rachel Reeves will deliver the new government’s first Budget on October 30 after which, Shrimsley said, ministers will have a better understanding of their spending power.
The state is back
He described the UK’s new Labour government as believing “in the strategic state” as a force for good, and while it does talk about its continued belief in the market, it is perhaps “less market-friendly than any government since the seventies”.
“This is a government that will regulate more aggressively, that will put more measures in place,” for example, greener building standards, he said.
He added the government would “prioritise building for growth – the only question is where that power will reside”, as handing more power to regional mayors is seen as one of three key growth drivers alongside planning and pension reform.
Budget predictions
In terms of predictions for the Budget, Shrimsley said that while he didn’t expect a big increase in departmental spending, he did expect “a very large jump for investment in infrastructure and digital upgrades, especially in the NHS”; an increase in capital gains tax, although not necessarily full equalisation; and a “tweaking” of pension tax allowance ahead of pension reforms.
He highlighted a “curious insistence” among treasury ministers of repeating that there would be no increase in ‘employee National Insurance’. “Since the word ‘employee’ is not necessary in that sentence, you have to ask why they keep using it,” he said, with the inference that Labour may look to increase employer contributions.
Shrimsley continued that the biggest change will come when the government redefines the definition of debt to allow more borrowing. And while we know there will be business rates reform, “we don’t really know what shape it’s going to take aside from the hint that the losers will be the larger multinationals, especially those with high space but low jobs and occupancy”, he said.
Immigration and international relations
As for relations with the European Union (EU) and immigration policy, he stressed that Labour was “nervous” about the threat posed by the Reform party and its hardline stance on immigration.
“We know this [Labour] government doesn’t look to immigration to fill the skills gap in areas like hospitality. They believe this is something where jobs should be filled domestically and we should reskill our own workforce”, he said, although he suggested the government may reach a compromise with the EU on youth mobility.
He concluded: “Labour wins elections when people think the country doesn’t work well and that we need to invest in infrastructure and in the state... the mission is to make things work. We know the direction; we don’t know the route.”