The buildup to Jeremy Hunt’s autumn statement on Thursday has inevitably been dominated by the big stuff: tax rises for individuals and companies; departmental spending cuts; and what, if anything, will constitute a plan for growth now that Liz Truss’s brief flirtation with deregulation and investment zones has been abandoned. But there is a smaller measure that should be getting more attention: business rates.
The CBI, the business lobby group, called action on that front its “main and modest fiscal ask” and was right to do so, because next spring’s “cliff edge”, in the usual lingo, will look daunting from the point of view of many small businesses on high streets.
As things stand, business rates are scheduled to rise in April by inflation – call it 10% – while the first revaluation of properties since 2017 will produce bigger increases for some. And, critically, the impact will be felt just as higher energy bills arrive, assuming government support on that front is either scrapped or turned down substantially.
Options for softening the business rates blow include increasing by less than the full 10%, or delaying implementation altogether. Alternatively, Hunt could offer targeted support to sectors – retail and hospitality would probably be at the front of that queue – or those firms facing above-inflation increases could be offered a slower transition.
Whatever the mechanism, the principle of smoothing is sound. Look forward to next autumn and one can sketch a plausible scenario in which inflation is substantially lower, energy prices have passed their peak and the cost of borrowing is falling. The UK may still be in recession, but the outlook would feel less threatening than today. The difficulty is getting there. For the most exposed high street firms, next April is the crunch point.
Hunt, notwithstanding his hair-shirt messaging, should think hard on business rates. Yes, a property-based tax is a target for lobbyists at every budget or autumn statement. On this occasion, though, the case for the relief is the strongest possible: the timing could make a genuine difference on struggling high streets. Help, if it’s coming, has to be offered on Thursday.
Deficit with Paris is least of our problems
It’s hard to muster a sense of national humiliation over Bloomberg’s finding that London is no longer Europe’s largest stock market, having been overtaken by the Paris bourse in terms of the market capitalisation of all the companies on each exchange.
A crossover – perhaps a temporary one – has felt inevitable at some point because currencies play such a large role in a comparison that measures everything in dollar terms. Sterling fell heavily against most currencies after the EU referendum in 2016 and it’s been nip-and-tuck between London and Paris in market-cap terms ever since.
It would be hard to turn this particular London/Paris story into a wider tale about the decline of the City of London. The volume of trading – not just in equities, but in bonds, interest-rate swaps and so on – also matters and is a better guide to the depth of the financial services industry. On that score, the main post-2016 headline has been how few jobs have left London.
And the usual criticism of London is that it has become a global backwater of stock exchanges – a Jurassic Park, as hedge fund manager Paul Marshall memorably put it last year on account of the lack of whizzy tech companies. His argument had some merit, but the Paris exchange looks equally populated by dinosaurs. Those dividend-paying dinosaurs, note, have looked less unfashionable lately. The FTSE 100 index, down 1% so far this year, has offered investors a good place to hide while observing the minus 17% for the S&P 500 in the US in the same period.
Comparisons versus the US market, it should be said, don’t look so favourable for London over the long term. But a market cap deficit with Paris (whether temporary or not) is the least of our problems compared with growth, especially in parts of the economy that lie outside the world of quoted companies.
Esso’s extrications
We’ve grown used to “headcount reduction” as a corporate euphemism for job losses. Here’s an uglier one from Esso Petroleum Company, a UK arm of ExxonMobil, in its annual accounts. It says it undertook a programme “that resulted in up to 220 employees being separated from the company”. Being separated? Come on, it wasn’t a passive act; it was deliberate.
