Tuesday, May 3, 2022

Sunak’s stamp duty holiday extension has merely inflamed the housing market

Surprise, surprise. Presented, or so they thought, with an end-March deadline to save a few thousand pounds on stamp duty, buyers rushed to complete their house purchases. Mortgage lending in the month reached a new record.

It requires no imagination to see what will happen in June, the extended deadline for the £500,000 zero band on stamp duty in England and Northern Ireland – an extension announced very late in the day by the chancellor, Rishi Sunak, in his March budget. There will be a repeat. Then the drama will be replayed in a miniature form in September as buyers try to get on the right side of the taper from £250,000 to £125,000.

Take a step back and you have to wonder why Sunak ever felt compelled to succumb to the housebuilders’ self-interested warnings about “a cliff edge” in March. He has merely created a new rush for completions at a moment when the housing market, by most measures, is running hot. Interest rates are rock bottom, mortgage availability is strong, and prices, viewed as a multiple of earnings, are back at 2007 levels. This is not a market that needed a fresh dose of adrenalin.

The Treasury in March estimated the cost of the extension at £1.3bn in the current tax year. Given that approvals are running so much higher than estimates, the final figure will probably end up closer to £2bn. In the grand scheme of the government’s economic response to the pandemic it is not much, but there are at least three reasons why the chancellor should not be given a free pass.

First, anecdotal evidence suggests a large chunk of buyers’ stamp duty “saving” has been pocketed by sellers in the form of inflated prices – first-time buyers have had to pay more. Second, letting £2bn slip between the cracks makes it harder to impose savings elsewhere. Third, stimuli work best when they are counter-cyclical. If Sunak had to dabble, a better moment would have been this autumn, as the furlough scheme ends.

Not for the first time (and surely not for the last), the government’s approach to throwing money at the housing market looks nonsensical.

Oxford Nanopore’s roundabout route to flotation

Oxford Nanopore, regarded as one of the UK’s most exciting tech prospects, is taking a roundabout route to flotation, or IPO. The big event is still scheduled for the second half of this year, but the DNA sequencing and analytics group topped up with £195m in a private round of funding on Tuesday.

The timing is slightly odd since an IPO, in theory, should be able to provide the financing the company seeks. Perhaps it is a case of management opting for safety and protecting themselves against a change in the financial weather. That is not unreasonable.

More interesting is the identity of the four new investors that contributed £125m of the £195m. Only one, M&G Investments, is from the UK. The other three are from overseas – Temasek from Singapore, Wellington Management from the US, and Nikon from Japan. That makeup fits a pattern in the UK tech scene: most of the pre-IPO funding for bright UK ideas comes from abroad.

Robin Klein, co-founder of LocalGlobe, a tech specialist venture capital firm, argued the other day that asset allocation in the UK pensions and institutional world has not got to grips with the tech revolution. It’s a fair point: Canadian pension funds almost seem more active than their UK counterparts at the scale-up stage of the UK industry. The position may be improving – but very slowly.

Pay packet row is the last thing AstraZeneca needs

Pascal Soriot of AstraZeneca has a better claim to a big bonus this year than most chief executives. The company has led the Covid vaccine fight and, for all the production and communication hiccups, is supplying a product for no profit in large volumes, which is commendable. Nor has AstraZeneca neglected the day job: last week’s trading figures were excellent.

Even so, a row over Soriot’s pay package is the last thing AstraZeneca needs. The contentious element is a boost in his incentive shares from 550% of salary to 650%, which sounds minor but is the sort of tweak that infuriates shareholders.

Soriot has collected £15m in each of the last two years, which may make him a pauper by comparison with big pharma peers in the US but ought to be enough. There was no need for another potential million on top.

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