The dust has now settled on George Osborne’s 2011 Budget and commentators have had plenty of time to ruminate on the effects the changes will have on the UK economy. There are plenty of contentious points in there, but how will the business travel industry be affected? More specifically, how will the UK’s serviced apartment industry change as the government’s plans are put in place?
Re:locate magazine recently invited a panel of experts to review the effects the Budget will have on the relocation industry. The panel were generally positive, arguing that a number of the measures being put in place will help to rejuvenate the property market and in turn bolster growth in the relocation sector.
The government has announced plans to create a UK-wide shared-equity scheme, which aims to encourage first-time buyers by offering mortgages of up to 75% on new-build homes. As the commentators in Re:locate magazine point out, this could help to stimulate growth in the property sector in general. This can only help the relocation industry and the serviced apartment industry, making it easier for new accommodation providers to enter the sector and easier for existing ones to purchase property.
New rules on stamp duty will also make it easier to enter the buy-to-let market. While previously stamp duty was calculated according to the bulk value of properties, it’s proposed that stamp duty on the purchase of more than one property will be calculated according to the average value of the properties instead. This will lead to significant savings and could increase the number of landlords who purchase property to use as serviced accommodation.
Another change that could positively affect the industry is the government’s intention to relax planning regulations: Osborne has said that, from now on, “the default answer to development is ‘yes’”. Add to this the Localism Bill, which gives more power to local regions to govern development, and the stage is set for fewer restrictions on property development across the UK.
The new enterprise zones in Birmingham, Manchester and across the country could also affect the industry in the long term. Liz Peace, of the British Property Federation, observes: “Previous [enterprise zones] in the UK served to kick start a process of regeneration which would not otherwise have been possible, with new factories, offices and other commercial development being delivered in some very challenging areas and times. The long-term transformation of London Docklands bears testament to this.”
The Docklands area is now a thriving business destination whose importance is growing rapidly; it’s also a property hotspot and accordingly sees great demand for business accommodation. If the enterprise zones in other areas of the country are successful, the UK’s business landscape could shift accordingly as they develop.
All of these measures are part of the government’s plan to “make Britain the best place in Europe to start, grow and finance a business”. If these plans come to fruition, it can only be a good thing for the serviced apartment industry, which will always benefit from a stronger economic climate, with better travel and relocation budgets and more companies starting projects abroad.
But what if things don’t improve as quickly as the government hopes? Well, the serviced apartment industry hasn’t done too badly out of the economic downturn so far. Although companies have been shying away from luxury apartments and have been cutting down on unnecessary trips, business travel buyers have shifted towards serviced apartments because of the simplistic payment structures they offer and because they are generally more cost-effective than hotels. In 2010, the sector experienced what Mark Harris of the Travel Intelligence Network called “extraordinary growth” and by the end of the year 57 per cent of UK businesses were using serviced apartments to cut costs. The industry looks set to remain buoyant, no matter what the economic climate.