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Conservative Manifesto – companies and industry

Three pledges from the Tory manifesto which could impact investors.

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

After a pretty revolutionary Labour manifesto, the Conservatives’ election pledges are far more modest. In fact it’s difficult to identify exactly what the party hopes to change – apart from ‘getting Brexit done’ of course.

Still there are a few titbits to interest investors. Any manifesto should be considered as a whole, and simply because a particular policy is good or bad for a particular industry, or group of shareholders, does not make it good or bad policy, that judgement is one for voters to weigh up for themselves.

Business rates

Business rates are a tax charged on non-residential properties. That makes it particularly burdensome on businesses that occupy lots of properties – things like high street retail, pubs and cinemas.

Along with higher staff and rental costs, business rates are one of the reasons high street retailers have found it so difficult to compete with online only rivals. One national warehouse only pays one set of business rates, whereas a network of shops around the country potentially pays hundreds of times.

The Conservative manifesto includes a commitment to a “fundamental review” of how the system works. However, the announcement is light on detail, and whether relief will apply to all retail chains or only smaller companies is as yet unclear.

Digital Services Tax

How to appropriately tax global tech businesses is a thorny issue parties of all colours are trying to resolve. The Conservative manifesto commits to a Digital Services Tax – although exactly how this would be implemented is less clear. One commonly mooted suggestion is to tax internet business on sales in each economy rather than profits.

Assuming the net result would be that the UK exchequer collects more tax then this would in all probability hit profits of major groups like Facebook, Amazon and Alphabet.

However, the UK is a relatively small market for these companies. The bigger worry for them would be that the UK paves the way for the EU or US to follow suit. Something to keep an eye on for big tech investors.

Corporation Tax

Perhaps the most significant announcement from an investor’s perspective is the decision to scrap a proposed cut in the corporation tax rate.

Corporation tax will stay at 19%, raising an additional £20.5bn in tax over the next four years. This means corporate profits are set to be £20.5bn lower than would otherwise have been the case, potentially denting dividend potential and reinvestment opportunity.

Read more of our general election coverage

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General election 2019

HL is not expressing a view on the merits or otherwise of any of the policies or any of the political parties, and nothing in this note should be taken to be an endorsement or recommendation of any particular party, candidate or policy.

Article image credit: REUTERS / POOL -

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

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