DEVELOPMENT INCENTIVE
TAX INCENTIVE
Implementing a tax incentive to our firm will allow our tax cost to decrease, to achieve this goal we have find an action that ‘socially responsible and/or benefits the community’.
Examples of how to do this:
Tax Deductions - Money given to charities from your firm is taken off your tax amount.
Tax Credit - This is a % given to you by the government, that you can spend of your tax money. For example, if you were putting your entire income into anti-pollution equipment, you would be given an 100% tax credit on spending on environmental improvement.
Tax Reduction - By partaking in a particular action or investment, the government may ‘forgive’ you of some of your taxes. For example, if you build a factory providing 75 jobs for the residents, you could be forgiven of taxes for the first 3 years and then it’ll gradually build back up to 100% tax (Community Tool Box, 2019).
Tax Incentives for architecture, include developing such as (Alliant Group, 2019):
New energy efficiency method
Master planning
Achieving LEED certificate
Building systems
Innovative shapes and forms
INFLATION
Inflation causes the price of everything to go up, from groceries to building materials (Economy, 2019).
In 2018, architects’ numbers, salaries and fee income increased however after everything that has happened with Brexit the outcome is not looking positive. A no deal Brexit could be critical for architects as there is a high number of professionals that have come from other areas in the EU, it could mean a high loss of talent (Architects Journal, 2019).
Due to the rate of inflation, most employees pay has decreased. There has been a gradual increase in services and material cost, and this could become more dramatic after Brexit, which will mean practices will have to work harder to maintain above water, and they might have to increase their prices. this will be a struggle since were in the possibility to go into recession which will prevent people from carrying on with projects due to too high costs.
ECONOMIC BOOM/RECESSION
Economic boom is the growth period, caused by an increase in consumer spending. It allows for productivity, profit and income to increase. however, this runs a high risk of inflation. Economic boom is predicted through GDP, positive allows for economic boom to start and vice versa. When GDP becomes negative this is causes businesses to contract as a recession is usually about to start.
A recession is a period of economic decline, which prevents businesses from be able to expand. We are in a current threat of recession due to Brexit and this could make it hard for a new business, and stop people wanted to pay for consumer goods, causing industry and services to slow down.
The great depression caused ‘form follows function’, today it has changed to ‘form follows finance’. This allowed for new sensational design to appear.
INTEREST RATES
Interest rates are the percentage your charged for borrowing or giving money. If you borrow money from the bank, then you are charged a percentage that you must pay on top of the loan. This is the same if you save money the bank pays you a percentage onto of the money back to use your money (Bank of England, 2019).
We will require a bank loan which means we will have to pay interest on the loan which will mean we have to pay more money back then we borrowed. So, by having a loan, it will mean every month we will pay the bank some money back towards our loan, this will be a chunk of the loan and a chunk of the interest (Bank of England, 2019).
This means that if interest rates rise then we will have to pay even more money back to the bank from borrowing a loan.
EXCHANGE RATES
An exchange rate is the value of a nation’s currency compared to another nation. For example, how many euros does it take to buy one pound.
This affects architecture because ‘fluctuations in exchange rates may affect the flows of trade and investment’ (Guillén, 2015), which means that if the value of compared currencies become more equal then essentially you cannot buy as many materials for your money, therefore trading becomes more expensive. It also means as exchange rates change then countries have more competition of who they trade too meaning that I might be harder to export a product (Guillén, 2015).
MARKET SECTORS
A market sector is part of the economy, not just an industry but many in one, so architecture is considered a secondary sector as it is part of construction (Market Business News, 2019).
Markets change just like the economy. There is a market cycle in which a market can go from the bottom to the top, the market cycle usually dives before the economic cycle, for example if we have a recession, the market cycle will be heading back up looking for a recovery (Beers, 2018).
The market sectors in an economic cycle (Beers, 2018):
Full recession - This is where interest rates are falling, consumers have stopped buying causing business to have suffered. however, the industrial sector has historically been one of the most profitable.
Early Recovery - This is when people are starting to spend again, production is increasing, and interest rates have hit their lowest rates. The industrial sector has also benefited here.
Late recovery - interests are rapidly increasing, causing consumer spending to start to decline again.
Early Recession - This is the bad turning point, interest rates are at their highest, production is falling because consumer spending is at its worst.
So, this cycle depends on when people will invest, people invest when they are sure they can make some money in return.
REFERENCES
Community Tool Box, 2019. What are Tax Incentives? [Online] Available at: https://ctb.ku.edu/en/table-of-contents/implement/changing-policies/tax-incentives/main [Accessed 9 Oct. 2019].
Alliant Group, 2019. Tax Incentives for the Architecture Industry. [Online] Available at: https://www.alliantgroup.com/industries/architecture/ [Accessed 9 Oct. 2019].
Economy, 2019. What is inflation? [Online] Available at: https://www.ecnmy.org/learn/your-money/central-banks-and-monetary-policy/what-is-inflation/?gclid=CjwKCAjwlovtBRBrEiwAG3XJ-7VWp3OIpmWQ7wPumEtSj3haUkn0e8Cq9HuB8hOiIeMVFmEAdsPSPBoC-t4QAvD_BwE [Accessed 14 Oct. 2019].
Architects Journal, 2019. AJ100 2019: Practices show resilience amid Brexit turmoil. [Online] Available at: https://www.architectsjournal.co.uk/news/aj100-2019-practices-show-resilience-amid-brexit-turmoil/10043152.article [Accessed 14 Oct. 2019].
The Balance, 2019. How to Know If You’re in an Economic Boom. [Online] Available at: https://www.thebalance.com/economic-boom-4067682 [Accessed 14 Oct. 2019].
Bank of England, 2019. What are interest rates? [Online] Available at: https://www.bankofengland.co.uk/knowledgebank/what-are-interest-rates [Accessed 6 Dec. 2019].
Kramer, M., 2019. Exchange Rate Definition. [Online] Investopedia. Available at: https://www.investopedia.com/terms/e/exchangerate.asp [Accessed 6 Dec. 2019].
Guillén, M. 2015. The Architecture of Collapse: The Global System in the 21st Century. Oxford: Oxford University Press, p.61.
Market Business News, 2019. What is a market sector? [Online] Available at: https://marketbusinessnews.com/financial-glossary/market-sector/ [Accessed 6 Dec. 2019].
Beers, B., 2018. Sector Rotation in Business. [Online] Investopedia. Available at: https://www.investopedia.com/articles/trading/05/020305.asp [Accessed 6 Dec. 2019].
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