New Structures and Buildings Allowance may lead to post-Brexit productivity boost
10/12/18
One of the least reported measures in the autumn budget may stimulate Britain’s productivity at a crucial time as we head towards Brexit. Nick Muir looks at the new Structures and Buildings Allowance.
The single most important long-term success factor in any economy is productivity.
And let’s face it, Britain hasn’t got a great productivity record. For many years we’ve lagged way behind our developed nation rivals.
This may explain why productivity is overlooked in discussions about how the economy could be shaped.
This is demonstrated by the fact that most post-Brexit econometric forecasts are ‘static’ in relation to productivity. It’s almost as if productivity doesn’t matter anymore.
It therefore didn’t surprise me that one of the least reported measures in the recent budget was the planned Structures and Buildings Allowance (“SBA”). Something that should have a positive impact on productivity investment.
This looks to me like the reintroduction (of sorts) of the Industrial Buildings Allowance (“IBA”) which was withdrawn in 2011.
Under SBA, as proposed, relief will be given in the form of a 2% annual write down on the physical costs of building new non-residential buildings or improving existing ones. It should incentivise businesses to invest in modern and productive facilities.
The type of buildings which will be eligible for this relief include:
- Factories
- Warehouses and wholesale premises
- Offices
- Hotels and care homes
- Retail premises
- Tunnels
- Walls
But not:
- Residential property
- Properties that function as dwellings
Eligible costs will include:
- Demolition costs
- Land alterations
- Direct build costs
The relief will NOT be available on the cost of land itself and only applies to construction contracts entered into on or after 29 October.
Some might say that 2% isn’t particularly generous and I would agree with that. But it’s better than nothing and will be beneficial to many businesses given that large building projects are, by their very nature, expensive.
And this measure, by itself, won’t be a panacea for productivity. For that, we need far bigger and many more initiatives.
But every little bit helps.
If you’d to discuss how the SBA could benefit your business, please give Nick Muir a call.
