Richard Pickering, Head of UK Research & Insight gives a personal view of the business and role of property in ‘New Europe’ , his weekly email update.
Secret strategy The British public will need to wait further for any indication of the UK’s negotiating stance on Brexit, David Davis has revealed. The Brexit minister stated that he will not be outlining the position until Article 50 has been invoked – a strategy conceived ‘in the public interest’. Acknowledging the frustration that this will cause for UK businesses, the MP for Haltemprice & Howdenshire confirmed that some details of the ‘most complicated negotiation of all time’ will be kept private even from his own colleagues. Although it remains likely that Article 50 will be invoked in 2017, the odds of this being ‘not before 2021’ are currently as low as 3-1. The wait continues.
Meeting in the middle In the same week that the British Chamber of Commerce has downgraded its growth forecast for the UK economy, Morgan Stanley and Credit Suisse have both upgraded theirs, cancelling previous predictions of a recession. BCC was late to the table and so its weakened forecasts (2016: 1.8%, 2017: 1.0%) are relative to a position in March. On the other hand, the banks had been quick off the mark and are now responding to improved economic data (MS: 1.9%, 0.6% / CS: 1.9%, 0.5%). Evidence that the pendulum-like behaviour in the markets is starting to slow down?
Bearing up and holding up Construction output has been more resilient than expected, according to the first ONS data release since the referendum vote. Output for July was unchanged on the June figure. Longer term trends show that private housing starts have been enjoying a strong phase over the past year, whereas the new public housing index is, by comparison, 35% lower. The cost of importing construction materials remains a risk to inflation and development viability, and increasingly eyes may turn to innovative building techniques and materials, such as Cross Laminated Timber. Could this reverse a trend away from wooden construction started 350 years ago following the Great Fire of London?
Lower for longer A survey by the Bank of England shows that only 21% believe that interest rates will rise in the next 12 months; the lowest in the 17-year history of the survey. Markets are now pricing in five more years at or below the current level, with the UK yield curve looking decidedly flat. However, unexpected inflation next year could yet unwind toppy bond prices – with prime property looking an increasing safe bet by comparison.