Press comment: Budget 2018

Following today's budget Quilter Investors Anthony Gillham,  Sacha Chorley and Hinesh Patel comment.

Commenting on the economic projections and the digital services tax, head of investments Anthony Gillham says:

“The improvement in the economic picture is welcome news, given the uncertainty surrounding Brexit negotiations. Stronger GDP growth is likely to see inflation move higher as consumer spending increases, which could lead to interest rates rising faster than some might have expected. However, the wild card remains the outcome of the Brexit negotiations and whether we experience an orderly or disorderly exit.

“One of the big headlines is undoubtedly the proposed tax for digital firms, which at 2% is not insignificant and illustrates the extent to which big tech is vulnerable to political and public discontent. Those firms are now among the biggest in the world and their stock prices have rocketed in recent years, however in recent weeks market sentiment has begun to change and we have seen stock prices struggle despite continued strong earnings. In addition, today’s news shows they are undoubtedly in the cross-hairs of policymakers and regulators. Whether it be the way they use our personal data or the taxes they pay, tech firms are attracting scrutiny and this digital tax proposal shows that has the power to impact them financially. This tax in the UK will not touch global revenues, but it could form a blueprint for international tax authorities.”


Commenting on the high street and digital retailers, portfolio manager Sacha Chorley says:  

“The high street has been absolutely decimated in recent years, with the decline of household names like BHS, Toys R Us and numerous others. The Chancellor’s proposed digital services tax is as much about trying to level the playing field between online businesses, including e-retailers, and traditional shops and retail outlets.

“It will be immensely complicated for the tax authorities to implement such a targeted taxation package that is limited only to tech companies with sizeable global earnings, and yet only force payments on UK profits. They will need to define exactly which business qualify and prevent them from avoiding the taxation by tweaking their model or the legalese they use to describe their businesses.

“This is likely one of the main reasons why the tax will not be implemented until 2020, buying some time to ensure the tax is structured in such a way that it is effective.

“Ultimately the devil will be in the detail here but if big tech companies are sensible they will work alongside government through the consultation period to implement the tax properly.

“The tax will be welcome news for traditional business trying to compete with the global tech giants. And the package of money made available to boost the high street will also provide some cheer.”


Commenting on business investment portfolio manager Hinesh Patel says:

“Government also wants to boost investment in business in order to try and counter one of the side-effects of Brexit uncertainty, which has seen businesses withhold capital from big projects until they know what the outcome of the UK’s Brexit negotiations will be.

“That cloud of uncertainty has had business leaders worried and despite moderately positive global growth conditions, many UK corporates have been keeping big project blueprints on hold until they feel confident investing for the long-term again.

“By raising the Annual Investment Allowance for two years, Hammond is hoping to provide an incentive for companies to commit to capital expenditure before the additional relief comes to an end. As a result, he believes that the incentive for business to spend now before the extra allowance expires will help to boost investment and smooth over some of the challenges Brexit has presented.”

“However, big businesses with the corporate firepower to make major investments will need a much bigger incentive than this tax break and will likely remain cautious until there is clarity from policymakers. While it may provide some incentive for small and medium sized companies to invest, this won’t turn the dial much for major firms.”

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