‘Everyone’s attacking Truss but her plan will attract foreign investors’, says Damac exec

alisajwani.ae

• Liz Truss’ plan will attract Gulf investors to the UK, says Ali Sajwani
• Sterling tumbled after the UK government unveiled its tax cut plans
• Cuts in planning red tape will ‘encourage foreign developers like us’

The UK’s new economic plan, which has rattled markets and prompted record drops in sterling, is not a mistake and will stimulate foreign investment, an executive from one of Dubai’s largest property developers has said.

The tax cuts proposed by the prime minister, Liz Truss, and her chancellor, Kwasi Kwarteng, are designed to spur economic growth, but critics have warned that they are unfunded and benefit high earners more than people on low salaries.

Since Kwarteng unveiled the measures on Friday September 23, the pound has tumbled against the dollar. Reuters reported on Wednesday morning it was down 0.95 percent to $1.06345. It collapsed to an all-time low of $1.0327 earlier in the week, from near the $1.130 before last week’s announcement.

UK government bond prices have plunged; and economists have called on the Bank of England to announce a rate hike to stem the pound’s decline. The International Monetary Fund on Tuesday also warned the new plans could undermine monetary policy.

However, Truss is on the right track, according to Ali Sajwani, general manager of operations at Damac Properties.

He told AGBI: “Everyone is attacking the new PM for what she’s done with tax cuts. I think it’s essential to bring back life into the UK.”

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Sajwani pointed to one of the proposed reforms: the return of tax-free shopping for tourists, which was abolished in January 2021 after Brexit. The abolition made goods 20 percent more expensive in the UK than in countries that still offer VAT refunds.

He said: “If you look at people shopping in the UK: I’m quite wealthy, I don’t buy in the UK anymore. I see what I like when I spend two months in the UK in the summer, [and then] I go to Paris and buy everything because they’re not giving me the VAT back. It makes a difference.

“So, what she’s bringing I think is actually going to stimulate the economy for investment. But the media is not talking about that. They’re just attacking her.”

The Bank of England has warned that the UK economy may already be in recession as energy costs, food prices and interest rates keep rising.

But Truss, who took office on September 6, has argued that her policies aim to kick-start growth.

“Lower taxes lead to economic growth, there is no doubt in my mind about that,” she told journalists last week as she travelled to New York for the UN General Assembly – even as President Joe Biden was tweeting that trickle-down economics have “never worked”.

An overhaul for UK’s ‘too bureaucratic, too slow’ planning laws

The new occupant of No 10 is also set to overhaul planning laws to let local communities approve developments more easily, arguing that the current system is “too bureaucratic, too slow, and too complex”.

She has promised to introduce investment zones to boost growth, which would involve selecting areas for redevelopment and offering reduced planning restrictions and a lower tax burden to encourage enterprise.

Britain’s planning laws have long been a source of frustration for property developers. 

“One of the toughest parts of doing business in the UK is actually the planning,” Sajwani said, calling some of the regulatory requirements “very strict”.

“So, with her coming in and saying that she’s going to ease those rules a bit, is going to encourage foreign developers like ourselves because it makes our lives easier to build in the UK.”

In an interview with The Sunday Telegraph in July, Truss said: “The best way to generate economic growth is bottom up by creating those incentives for investment through the tax system, simplifying regulations.”

Earlier this year, Damac handed over its first project in Europe: Damac Towers Nine Elms, a 50-storey luxury twin-tower with apartment interiors by Versace, in south-west London near the Thames.

Sajwani said the Dubai-based developer is keen to continue expanding its brand in the UK and across Europe’s key capitals. “We are always constantly looking at the right opportunities in foreign markets.

“But you have to have the right land [and] the right location.”