Back to newsYesterday’s Budget: Real-World Implications for Property, Business and Lending
When our new Marketing Director, Jonathan, suggested that I should produce a short article on how the Budget may impact our clients, my instant reaction was that this was a good idea. Having begun to write it, I find myself out of my comfort zone and trying to draft something from a non-political standpoint is a mighty challenge. After all, I am a middle-aged entrepreneur brought up in the Margaret Thatcher era and I am of the generation where working a 60-hour week is the norm. So here goes…
For context we are a property backed lender who prides itself on our commercial approach to lending providing a face to face relationship that many SME business owners can’t find anywhere else nowadays.
Overall, this Budget will have far less impact on business than the last one – it is unlikely to stifle investment, as those entrepreneurs who have stayed at the table following last year won’t be fazed by yesterday’s Budget. An increase in dividend tax was expected and far less painful than the CGT increases of last year. Hopefully, all those clients who have been waiting for the Budget before making important business decisions will now be able to take the brakes off and move forward. We are here to help.
How will the Budget impact the property market?
Higher rental related taxes will be a further burden for landlords as successive Governments have reduced the incentive of building a property portfolio partly through the changes in the tax regime and also through amendments to renters rights. Many landlords will be reviewing how BTL property returns compare with other options. Yesterday afternoon, I met with a lady who is downsizing her property portfolio with a view to lending money to OSBF where she will get a better net return. Other options are, of course, available!
The property market has been sluggish for the past couple of years, with properties taking longer to sell and prices under pressure, particularly where there is a need for a quick sale. Yesterday’s announcements have done nothing to help that. Our commercial approach to lending will ensure that we can lend where others don’t, but a price correction feels likely, and all borrowers should expect the lending market to be cautious currently. We will continue to support our bridging clients with loan extensions where necessary and re-bridging away from other lenders who are less inclined to help, will remain a core part of our business.
The landscape for our B2B clients remains largely unchanged following the Budget. We expect significant demand for our working capital loans to continue and our ever-popular revolving credit facilities secured on property assets. These represent a hugely flexible funding option at a lower cost than invoice finance and we continue to regularly win work sitting alongside or removing invoice finance facilities.
B2C clients and in particular our hospitality clients may be impacted more directly by a need for consumers to reduce discretionary spend and the above inflationary increases to the minimum wage. We will of course continue to support this sector as we have done in the past.
I feel for our housebuilding clients. The material price increases from the Covid period remain, house prices are not helping them and the downward price correction that I have been expecting in land values has largely still not materialised. We retain good appetite in this area but the shift in all the above factors means that deals which stacked up five to ten years ago don’t anymore. I do struggle to see how Government plans to build vast numbers of new houses align with little or no support for the SME housebuilder.
Overall, our risk appetite remains unchanged, and we will continue to support entrepreneurial SME businesses many of whom are unloved by the wider lending industry. Whilst rapidly growing and distressed businesses may be our speciality, everyone with property security and a robust repayment plan is welcome. The repayment plan allows our responsible lending approach to thrive. Our flexible, human and commercial approach to lending, with no tick boxes will continue to be different.
If you have questions about how this might impact your plans, we’re here to help.
Andrew Mackenzie
Managing Director, One Stop Business Finance
