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Boardroom survey finds fears over UK economy

A majority of business boardrooms are predicting a downturn in the UK economy over the coming year, as Brexit uncertainty and trade war troubles take a toll on corporate confidence.

Almost 70 per cent of respondents from FTSE 350 companies believe that the UK economy will decline in the next 12 months, improving from 81 per cent at the end of 2018 but still remaining significantly below the spring reading in 2016 before Britain voted to leave the EU.

Forecasts about the outlook for companies’ own industries have rallied slightly with 43 per cent predicting a decline, down from 50 per cent last winter, according to the findings from the ‘Boardroom Bellwether’ survey published by The Chartered Governance Institute in association with the FT.

Publicly-listed companies in the UK are on the fence about the effect of no-deal Brexit, today’s report found, with 40 per cent believing it would be damaging, 40 per cent believing it would not and 20 per cent unsure.

“The continuing uncertainty about what a post-Brexit Britain might look like, muddled even further at the time of the survey by the Conservative party leadership contest and differing views with regard to a no-deal Brexit, has undoubtedly contributed to the pessimism that people are feeling,” said Peter Swabey, policy and research director at The Chartered Governance Institute.

Meanwhile, the perception of the UK government as business-friendly has fallen from 29 per cent in summer 2018 to 15 per cent this summer, while the number of respondents viewing the government as not business-friendly has risen sharply from 13 per cent in winter 2018 to 42 per cent.

Despite this, the opposition has not benefited with 81 per cent of respondents viewing Labour as not business-friendly and not one respondent considering that it is, the lowest result since winter 2015 when two per cent believed them to be business-friendly.

“The survey was carried out before Boris Johnson was chosen as the Conservative leader, but it does seem that the business-bashing of recent times has taken its toll. The government must remember that business plays a key part in creating wealth and employment,” said Swabey.

By Sebastian McCarthy

Source: City AM

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The Government Proposes Radical Reforms To Stop Unfair Leasehold Practices

Shortly before Christmas the Government published its response to a consultation, issued earlier this year, on “Tackling unfair practices in the leasehold market”.

The consultation arose as a result of adverse publicity surrounding the practice of developers selling new-build houses as leasehold properties and the inclusion of so-called ‘market’ ground rents, with onerous rent review provisions in new leases of both houses and flats.

In its response, the Government proposes some radical changes to the way residential homes, particularly new-build houses and flats, can be sold to prevent the perceived abuse of leasehold ownership structures by some developers and landlords.

While the specific details of the proposals and the timetable for new legislation remains unclear, their impact, particularly for developers and investors in residential property, should not be underestimated.

The proposals will be welcomed by those looking to buy new homes, but will be of limited assistance to existing owners of leasehold houses, and owners of leases with onerous ground rent provisions.

The key proposals are as follows:

  1. Ban on the sale of new leasehold housesLegislation will be introduced, ‘as soon as Parliamentary time allows’, to prohibit new long leases of houses from being granted and this legislation will apply to both new build and existing freehold houses. The legislation will clearly define the meaning of ‘new build’ and ‘house’, definitions which many argue are currently ambiguous.

    It is likely that there will be some exemptions, with one permitting the continuation of shared ownership schemes being mentioned in particular. The Government has said it will work with sectoral partners to consider if there are particular cases where leasehold houses can be justified.

    Where land is currently leasehold, so that it is not possible to sell new freehold houses, developers may continue to build and sell leasehold houses on that land. However, to prevent this exception being used as a loophole, such sales will not be permitted where the developer’s lease is created after 21st December 2017 (i.e. the date of publication of the Government’s response).

  2. Limiting ground rent on new residential leases of houses and flatsLegislation will be introduced to set ground rents in all new leases over 21 years of houses and flats to a peppercorn (i.e. zero financial value). Again, an exemption will be made for shared ownership schemes.
  3. Remedies for existing owners of leasehold houses or of leases with onerous ground rentsThe ban on the sale of new leasehold houses will not assist existing owners of leasehold houses. Instead, the Government has said that it will consult on proposals to improve the current statutory rights of leaseholders to buy their freehold or extend their lease so that they may do so on more favourable terms.

    The proposed new limit on ground rents will not apply retrospectively to existing leases with so-called ‘onerous’ ground rent provisions. Rather than legislating to cap these rents, the Government wants to see developers and freeholders offer redress schemes to compensate owners of existing leases with onerous ground rents, and to proactively contact such owners to offer compensation (some housebuilders have already set up such schemes). The Government does not set out what it considers to be an ‘onerous’ ground rent and this remains open for debate.

  4. Assured tenancy loopholeAs a result of landlord and tenant legislation for assured tenancies (Housing Act 1988), there is a technical legal issue affecting some long leases of residential properties with substantive ground rents. The legislation currently provides that where ground rents in a lease exceed £250 per year (or £1,000 per year in London) the lease is classified as an assured tenancy and the leaseholder is an assured tenant. As an assured tenancy, the lease can, in theory, be terminated by the landlord for even small sums of rent arrears as the landlord can obtain a mandatory possession order. This loophole creates problems for owners of affected leases in terms of marketability and in obtaining mortgage finance. The Government will take action to address this loophole and ensure that leasehold owners are not subject to unfair possession orders.
  5. Residential management charges on freehold estatesLegislation will be introduced to ensure that freeholders who pay residential management charges have rights to challenge the reasonableness of such charges, equivalent to the statutory rights that leasehold owners currently have to challenge the reasonableness of service charges.
  6. Further areas of leasehold reformThe Government will consult and will work with the Law Commission on other possible areas for reform including:
    • (as referred to above) simplification of the rights of leasehold owners to buy the freehold interest in their properties, or to extend their leases, with priority given to owners of houses. The Government will consult on introducing a simple prescribed formula that provides fair compensation to the landlord, whilst also helping leaseholders avoid incurring additional court costs. It will also consider the introduction of a right of first refusal (similar to that already available for owners of flats) for owners of leasehold houses.
    • The introduction of a minimum term for new long leases of flats.
    • Looking at ways to reinvigorate the use of commonhold as an alternative tenure to freehold and leasehold.
    • In the longer term, as a consequence of the ban on new leasehold houses, the Government has also said that it will respond to the recommendations contained in the Law Commission’s 2011 Report ‘Making Land Work: Easements, Covenants and Profits a Prendre‘, for reform on easements and covenants to ensure that it is easier for developers to set up freehold schemes with positive obligations relating to estate management and provision of services.

    Whilst uncertainty remains over the details of some of the proposals and exactly when they will be implemented, the Government’s commitment to reforming the leasehold market is seemingly resolute. Wide scale statutory reform can be expected in the future. Developers and investors should be pro-active in their reaction to the Government’s proposals and bear them in mind when structuring and financing new residential schemes.

Source: Mondaq

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Can UK property market continue to be a government cash cow?

As the UK property market looks set for a period of subdued growth in the short to medium term, can the sector still deliver growing tax revenues to the UK government? This is a question which will be on the lips of many politicians who have continually milked the UK property market for increased tax revenue in times of economic stress. The opportunity to paint buy to let investors as investment opportunists was grabbed with both hands by the UK government – with all political parties happy to increase tax obligations for private landlords. However, will the government still be able to milk the sector in the short to medium term?


Even though the London housing market is set to underperform the rest of the UK, it is easy to forget that it has far outperformed the UK market in general for many years. There have been signs of London homeowners selling up and taking advantage of the “London premium” to acquire larger properties in areas outside of the capital. This could to a certain extent soften the blow for regional markets over concerns regarding the UK economy and Brexit in the short to medium term. However, even the most opportunistic of forecasts in the short to medium term do not offer very attractive growth scenarios.


In recent times we have seen political parties right across the UK attempting to tinker with stamp duty as a means of “attacking the rich” and defending those at the lower end of the property market. The likelihood is that these moves were simply a way of currying favour with voters in the UK but there is only so much tinkering you can do before you milk yet another tax cow dry.

The situation with buy to let investors is even worse with a significant increase in tax liabilities in recent years. We know from a variety of surveys that some buy to let investors will be taking a sabbatical from the UK market to wait and see how things pan out. So, these two particular tax income streams are under pressure and likely to deliver reduced returns in the immediate future.


While every politician will suggest that a tax on property investors is a tax on economic growth in the UK, this is not necessarily the case. The simple fact is that if you have a product which will cost you more to “produce” in the future then you simply increase your price and the end user will subsidise the increased costs. In this particular instance it is the private rental market which will have to bear the brunt of recent tax rises. Indeed the recent attack on those acquiring second homes/holiday homes could also backfire with local house prices likely to consolidate together with a potentially detrimental impact on local economies.


Rightly or wrongly, each government in the UK can only look to the short term to consolidate its position with the voting public. An increase in taxes to subsidise public services, tax on the rich to curry favour with voters and constantly milking the property/housing market cash cow may grab the short term headlines but they can do long-term damage. Investors quite rightly demand a level playing field where they can visualise costs in the short to medium term as well as prospects for the UK economy.

The more taxes heaped onto the property market the less incentivised investors will be to invest and with UK interest rates starting to rise, albeit slowly, there will come a point where the risk/reward ratio for investment in buy to let property becomes unattractive. In the short to medium term at least, it does look as though the UK government has milked the housing/property market to the extreme and may need to look elsewhere for new tax income streams.

Source: Property Forum