An Uncertain Budget for Bridging Loans and Property

March 16, 2017

Towards the start of Wednesday’s Budget – his first, the first to be delivered after the referendum and the last to be delivered in the Spring – Philip Hammond recalled the last time a Chancellor had announced that he was giving “the last Spring Budget”.


That was Norman Lamont in 1993, and he, like Hammond, painted a rosy picture of the UK economy that was praised by his Prime Minister. Ten weeks later, Hammond noted, Lamont was sacked. Uncertainty is a fact of life, in politics and economics.

Uncertainty also means that Hammond’s optimistic take on the state of the economy may be less reassuring than it is meant to be. The source of much of that uncertainty is Brexit, the ten-tonne elephant in the room. Hammond announced that the Office for Budget Responsibility had upgraded growth forecasts for next year, which is true, but it has also downgraded expectations for subsequent years. The OBR, in effect, has predicted that the hit caused by Brexit will be delayed, not diminished.

What is more, the OBR’s analysis, on which Hammond’s budget is based, makes some key controversial assumptions about Brexit. It assumes that the government misses its immigration targets, with the net figure remaining substantially higher than the desired ‘tens of thousands’. So the government is basing its economic policy on the expectation that its migration policy will fail. Missing the target would be good news for economic growth, but the politics of Brexit and the anti-migration sentiment Theresa May has often followed might mean that immigration is reduced far more.

The OBR also assumes that the UK government will not be stung for a ‘divorce bill’ by the EU. On this basis, it predicts a falling public debt, with the deficit much reduced, though not quite eliminated, by 2020. But this assumption is highly uncertain, with legal and political decisions which are difficult to predict likely to determine whether, and how much, the UK is made to contribute to EU coffers on its departure.

The OBR also predicts that Britain will leave the EU in April 2019, two years after the imminent triggering of Article 50, according to the timetable promised by Theresa May. But remember, this is a budget in which the Conservatives, having fought the last election on the pledge of no increase in National Insurance, have increased NI for the self-employed. It is also a budget that reminds us that George Osborne, seven years ago, planned to eliminate the deficit in five years, and came nowhere near succeeding. Political plans, pledges and promises, as we have seen, can be easily set aside, fudged, or overtaken by events. It is not unreasonable to predict that Brexit will run to May’s announced timetable, but it is highly uncertain.

There was little in this budget that directly tackles what the government’s own White Paper calls “Britain’s broken housing market”. Disappointing campaigners, Stamp Duty, which has put a brake on property sales, particularly at the top end of the market, was unchanged. There were no measures to free up finance for small developers, and with banks still cautious, options such as bridging finance will become more vital to get Britain building. There was a small relief for those hit by the changes in business rates, which will be welcome for some owners of commercial property.

Given the lack of measures around the property market, and the uncertainty surrounding many of Hammond’s predictions, our advice to those involved in property is this: keep an eye on the Brexit negotiations, especially the future of immigration policy, trade agreements, and the divorce bill; and on the Bank of England’s policy around interest rates. These things will have far more impact than anything in the last Spring Budget.

For more information, or to apply for a bridging loan, contact us.

This article was written by Matthew Dailly, Managing Director of Tiger Financial.

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