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IPD UK Forestry Index
Fiona Mannix Associate Director of RICS Land Group (RICS) 15 May 2013 This week I attended the launch of the IPD UK Forestry Index in London. This index is calculated from a sample of private sector coniferous plantations of predominantly Sitka spruce in mainland Britain. For 2012 this index produced a significant return of 18.3%. The index as it stands covers five regions; North / Mid / South Scotland, North England and Wales – South of England being excluded for obvious reasons. As at Dec 2012, the index represented results from 148 plantations with a combined value of £220.7 million with over half of that value located in Scotland. The point was made that the index represents upland forests. Demand for commercial forests in Britain currently outstrips supply – a familiar tale to many involved in the farmland market. While commercial forestry, as with farmland, enjoys significant tax advantages it’s important to note that there are a range of other drivers also leading to demand. Land based assets remain attractive to investors. For those who accept the longer term nature of commercial forestry investment, it provides an alternative home for cash deposits in times of low interest rates and is also suitable for those seeking a stable less volatile investment. While the main component on the return side is the capital value appreciation of the land, there is a return on the timber sales side. While the very nature of commercial forestry means cyclical felling provides investors with irregular returns, it does yield substantial income. It was very interesting to note that over the past five years commercial forestry showed a total return of 17.7% versus the all commercial property category which showed an overall return of 0.7%. While we know that the last five years is not representative it is nevertheless worthwhile to note that even over the longer timeframe of 20 years commercial forestry returned 8.1% versus all commercial property returning 8.9%. A number of interesting additional points were raised throughout the event and in particular during the Q&A session which I have outlined below. Is forestry the perfect hedge? Commercial forestry as an asset class can be used to mitigate risk elsewhere in an investment portfolio There will be increased demand for wood in the longer term Increasing demand coming through on the biomass side The industry needs to be able to explain itself to potential investors Is there sufficient land to keep replanting at the rates required? Will the industry be in a position to satisfy the demand requirements over the longer term? How should the planting of commercial forestry be incentivised? What to do about planning issues? The future is bright – the future is green Continue reading
Market Turmoil Forces G8 Leaders To Focus On Global Economy
http://www.ft.com/cms/s/0/97cbce80-d4ee-11e2-9302-00144feab7de.html#ixzz2X2HHQztS By Chris Giles in London, Robin Harding in Washington and Ben McLannahan in Tokyo Turmoil in financial markets is once again overshadowing a Group of Eight summit, turning world leaders’ attention away from trade, tax and transparency and back to the bumps on the road to recovery. With global bond markets swooning on the hint that the US might slow its money-printing operations and currency market volatility leaping as investors try to gauge the right level of the dollar and the yen, G8 leaders know the world economy remains a dangerous place. None of this was in Britain’s scripts for the summit. Only a month earlier, when the finance ministers and central bank governors of the Group of Seven met just outside London, George Osborne welcomed the breathing space financial markets were offering. “We are meeting at a time when financial market sentiment has improved and there are signs this is feeding through to an improved outlook in some of our economies,” the British chancellor said after the G7 meeting. Britain’s expectation of a relaxed chat about Abenomics, the name given to Japanese prime minister Shinzo Abe’s three-pronged approach to reviving his country’s economy, alongside the perennial pressure on Germany to boost its domestic demand will now have a sharper edge. But the actor who has done most to influence the global economy in the past few weeks, Ben Bernanke, chairman of the US Federal Reserve, will not even be at the G8 and will not speak until the day after it finishes. The Fed winds up its two-day meeting on Wednesday. Mr Bernanke will be at the centre of G8 discussions because it was his comment last month that the Fed might start to slow its third round of quantitative easing at one of its next few meetings that sent markets down. Next week is unlikely to be that meeting, given some continued weakness in the data, and uncertainty about the effects of tighter US fiscal policy. But bond investors have taken the words as a sign that the peak of bond prices had passed and the smart money should exit. Instead, Mr Bernanke is likely to sharpen the signal about when the Fed will taper QE3, while repeating as loudly as he can that it all depends on the economic data and there is a big difference between easing at a slower pace and actually tightening monetary policy. The simple reality for most Fed officials is that the economic outlook looks better now that it did when the Fed began QE3 last September. The unemployment rate has come down from 8.1 per cent to 7.6 per cent. Given that, it cannot make sense to keep easing monetary policy at the same pace forever, and Mr Bernanke’s “next few meetings” remark reflected that. To the extent that recent turmoil knocks a bit of froth out of global markets, the Fed will regard it as no bad thing. If G8 leaders are missing one key figure in the global economy, the other is in the room, Mr Abe, whose “Abenomics” has pushed a rapid recovery in the world’s third-largest economy, but with continued long-term fears for its sustainability. Mr Abe will come to Lough Erne with a simple argument. The 15 years of deflation Japan has experienced, more or less without interruption, were extraordinary, so they demanded an extraordinary policy response. G8 summit Read our coverage of the gathering as leaders debate tax, trade, the global economy and foreign policy So far, trading partners have fixated on the yen, still the world’s worst-performing currency over the past six months even after its rapid rise over the past week. But a lower yen is a side-effect of a concerted effort to rouse the world’s third-largest economy from slumber, the prime minister will say. What is good for Japan is good, for everybody else. Unofficially, the Japanese argument is even simpler, however. The yen acted as the world’s shock absorber for the four years after the Lehman crisis, Japan thinks. Even now, amid a fresh round of fears over global growth, it is still about 5 per cent stronger than its 10-year average against the US dollar. So, leaving aside all the talk of trade wars and stealing growth from neighbours, isn’t it time Japan caught a break? Germany and the US are wary about this conclusion and will be relieved by the yen’s recent bounce back as they tolerated but did not welcome the yen’s depreciation since the start of Abenomics. But the key question for Japan is whether the boost to growth is anything more than temporary. Here, Mr Abe will try to spell out the guiding principles behind the “third arrow” of structural reforms, that was approved by the cabinet on Friday. Arrows one and two – fiscal and monetary stimulus – were easy to implement and quick to take effect. The third will not be. Continue reading
UK’s Offshore Finance Centres Commit To Tackling Tax Evasion
http://www.ft.com/cms/s/0/7f1d3e2a-d5e6-11e2-9dbd-00144feab7de.html#ixzz2X2GjjljT By Vanessa Houlder All of Britain’s offshore finance centres have committed to sign a treaty tackling evasion, in a boost to David Cameron’s efforts to secure agreements on transparency from other world leaders next week. Danny Alexander, chief secretary to the Treasury said the decision by all Britain’s Overseas Territories and Crown Dependencies to sign the multilateral convention on mutual tax assistance would “strengthen enormously” the arguments for greater transparency at next week’s summit of the G8 group of leading countries. The announcement was made at a meeting of political leaders, business representatives and civil society in London on the agenda of trade, tax and transparency. Mr Cameron also promised to consult on whether to make public a planned central register of the ‘beneficial ownership’ of companies, which will reveal who are their ultimate owners. Campaigners have called for public registers to maximise scrutiny of potential illicit deals. He said more transparency was needed because “some people use complicated and fake structures to hide their profits and avoid taxes and also because bribes are often held in opaquely-owned companies with bank accounts in secretive havens.” Mr Cameron said “The most important thing is that it is available to tax authorities. It will be their first point of call to try and uncover corrupt payments or tax evasion. “We will consult on whether it will be public but personally I would hope the whole world will move towards public registers of beneficial ownership.” He added: “I want to maximise the leverage the UK has over others in terms of taking each step in turn and want to make sure that business and enterprise comes with us on this debate. “ Will Morris, chair of the tax committee of the CBI said it was “very supportive of the idea of a register of beneficial ownership. “We think it is a ‘no brainer’”, he said. He said the CBI did not yet have a view of whether it should be public or private but he personally would support making it public. Mr Cameron told the meeting: “Each and everyone of our Overseas Territorities and Crown Dependencies has agreed to sign up to the multilateral convention on information exchange. “They have also agreed to exchange information automatically with the United Kingdom and to produce action plans on beneficial ownership. Mr Cameron said he would call on other international partners to work with their territories reach similar agreements. Although most of the Crown Dependencies and Overseas Territories had already committed to sign the treaty, some had expressed reservations. In a statement, Bermuda said the concerns it had expressed about signing the multilateral convention were because Bermuda’s fiscal system was not appropriate for automatic exchange of tax information. But it added, the ‘wisdom of the drafters’ of the multilateral convention meant that automatic exchange was based on mutual need and mutual agreement of both parties. The decision of all the offshore centres to commit to the treaty will help neutralise some of the criticism frequently levelled at the UK by other countries asked to make concessions on transparency although reservations are likely to remain regarding the transparency of trusts. All the overseas territories and crown dependencies said they supported the government’s drive on transparency but Richard Hay, counsel to the IFC Forum, which represents professional firms in British offshore centres, said the UK was taking a risk of an own goal by moving ahead of other countries, particularly the US. Continue reading
