By Gavin Gibbon
UK Chancellor Rishi Sunak is set to give his first budget speech on Wednesday amid economic uncertainty caused by falling oil prices and the deadly coronavirus spread
While coronavirus is predicted to take centre stage at UK Chancellor Rishi Sunak’s maiden budget announcement later today, Gulf investors will be keen to see how much of a leading role stamp duty will play in proceedings.
A former Chief Secretary to the Treasury, Sunak was thrust into the role as Chancellor following a cabinet reshuffle in February.
As if his job wasn’t difficult enough, with less than a month to put his stamp on the UK’s post-Brexit finances, the onset of coronavirus has forced a re-write ahead of Wednesday’s announcement, with a strong focus on supporting the public health response to the crisis, and businesses, and ensuring the country’s economy doesn’t go into meltdown.
Earlier this week, he said the government would give the NHS "all the support it needs to get through this" and added that he was looking at "options to provide temporary support to small businesses".
Beyond that, however, there is plenty to focus the interests of Gulf investors, not least the implementation of a reported three percent stamp duty surcharge on the purchase of homes by non-UK tax residents.
According to property advisor CBRE Middle East, investment into the UK from the Middle East in 2019 was down 60 percent on 2018, falling from £3.7bn to £1.5bn.
Earlier indications were that there would be a modest one percent increase in stamp duty, but this is now expected to be up at three percent.
Alyson Thornton-Clark, a partner at Cripps Pemberton Greenish, feared that a hike in stamp duty tax could inhibit further investment.
She told Arabian Business: “Already deemed one of the most confusing of taxes, we are fearing further changes are expected in the budget.
“Boris Johnson previously mooted reforming the SDLT (stamp duty land tax) system by either raising the threshold or lowering the rate and the Conservatives' manifesto made a commitment to introduce a higher tax charge for overseas buyers and most commentators are predicting this to be included in Rishi Sunak’s first statement.
“These buyers could face a three percentage point stamp duty surcharge on top of the existing surcharge for overseas buyers: so sadly it looks likely that for some purchasers SDLT will continue to be a rising barrier for entry into the UK property market.”
According to government figures it is estimated that one in eight new London homes were bought by non-UK residents between 2014 and 2016.
However, an increase in taxation may force Gulf investors to reconsider.
Tom Pugh, an economist at Capital Economics, told Arabian Business: “Gulf investors may be concerned about any measures to impose additional taxes on property transactions by foreign residents would be the main potential issue.
“The budget is likely to focus on actions to mitigate the impact of coronavirus, which could help to support markets. We are also expecting a splurge on infrastructure which should benefit construction companies both domestic and foreign.”
But Professor Stephen Thomas, associate dean, MBA programmes at Cass Business School in Dubai and London, said he would be very surprised to see any moves by the Chancellor which would impact investment into the capital and wider UK.
“This emergency stuff around the virus, why would a government suddenly make London less attractive? The last thing you want now is to shake things in the wrong direction by some big policy change,” he said in an interview with Arabian Business.
Professor Thomas said that weak sterling, coupled with long-awaited clarity over the UK’s exit from the European Union, continued to make Britain an attractive possibility for investors, regardless of the spread of coronavirus.
He added: “I don’t think the budget is going to say much at all. The guy’s (Sunak) up against the wall, just trying to get through the next few months and keeping the economy afloat. They will make unlimited resources available to the National Health Service.
“But I think in terms of big news for Gulf investors it will be relatively limited, relatively muted, and they should be looking through this virus cycle for a year or two and realise that the country’s on a better path than it was six months ago before the election.”