Brexit uncertainty bites, but how is it likely to impact Budget 2020?
Industry news emanating from the UK reports that construction activity there has fallen to low levels last seen in 2009. Builders are blaming Brexit uncertainty for clients – particularly those in the commercial sector – slashing projects and stalling work altogether. The Brexit deadline of 31st October is fast approaching and the outcome is becoming more certain but in an increasingly negative way. For the fifth consecutive month, the volume of new orders is down significantly, according to the IHS Markit/Cips UK construction PMI survey. Delayed decision-making is cited as the main symptom of this ‘limbo’ state. Building lobby groups are warning that further declines over the coming months are likely and, given the already-tight margins, this will inevitably result in the failure of many small building firms.
Adding to the sense of frustration, analysts have said that any Brexit deal at this stage is unlikely to revive the industry before the end of the year. In fact, the statistics for September are expected to be “more discouraging” than what we have seen in recent months.
Here in Ireland, the industry is keeping one eye on Brexit and one eye on Budget 2020. The Finance Minister has an objectively challenging (if not impossible) task ahead, trying to preempt on October 8th what an external and somewhat volatile regime will do on October 31st. At this point, we simply do not know what shape Brexit will take and, for that reason, it is difficult to know what parts of Ireland’s economy to protect as a priority. Economic commentators from PwC and similar bodies are forecasting a Budget line-up “very similar to last year”. There will need to be some positive measures to keep people’s incomes in line with inflation, but that might be the extent of the good news.
Despite vague promises, there is no longer expected to be a rowback on the 3% surcharge that self-employed people earning more than €100,000 continue to pay. Maybe next year…
We still do not have any real clarity around the Help-to-Buy scheme for first-time buyers, which is due to come to an end this year. It seems inevitable that the scheme will be retained, extended or indeed replaced with a similar supply-side initiative, but this cannot be taken for granted. One potential change speculated about is the value of properties eligible for the scheme, which may well be reduced from the current threshold of €500,000.
We are unlikely to see a further increase of commercial stamp duty after the hike from 2% to 6% in Budget 2018. There have been repeated calls for incentives to encourage smaller landlords back into the marketplace so this will be an interesting space to watch. By now, all pre-Budget submissions have been made so we must wait until the annual kite-flying exercise in the run up to Budget Day begins…
Director / Business Development
Lotus Investment Group