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.
Bang! As we cast an eye forward to the future of the UK’s financial market, it is also a helpful moment to look backwards. Thirty years ago this week, Margaret Thatcher ushered in a series of measures deregulating London’s Stock Exchange, and overnight the shape of our financial markets was transformed. The move to technology-backed, free market banking is accredited with securing London’s global financial crown, as well as with the birth of Canary Wharf. It would be easy to forget that it is not our right to hold this title, but a privilege won through challenge and innovation. Our deep rooted financial infrastructure will act as a brake on industry relocation post-Brexit. However, our willingness to embrace and encourage new industries such as FinTech will surely be what marks out our success looking forwards.
Inflation to rocket? The National Institute for Economic and Social Research (NIESR) has published a view that inflation (CPI) will rise to c.4% during the second half of next year, up from its current rate of 1.0%. Referencing the positive ONS growth data, NIESR nevertheless noted that “the outlook remains one of a slowing economy, confronted with significant risks”. Whilst considering the higher rate of inflation (comparable to that last seen in 2011) to be a “temporary phenomenon”, their forecasts don’t come back within the BoE target of 2.0% until 2020. The UK high street will be watching nervously.
Tower takes off In a major vote of confidence in the City office market, AXA IM / Lipton Rogers has affirmed its commitment to build out 22 Bishopsgate, with construction expected to start this side of Christmas. The 1.4m sq ft tower will complete in 2019, and in that year it will account for 42% of total floorspace. The decision may reflect the strong take-up exhibited in the Leadenhall Building (100% let), 20 Fenchurch Street (100% let), 100 Bishopsgate (50% prelet) let and the Scalpel (35% prelet). Nevertheless, a brave decision by the developer, and potentially one with a sting in its tail for the wider market. Accounting for such a large percentage of supply, there were undoubtedly some that would have preferred this didn’t go ahead, thereby softening competition. What other schemes might now not proceed as a consequence?
Fawkes lifts off Lord Bamford, Chairman of JCB, has told the House of Lords that UK businesses would be better off outside the single market, on account of the cost of EU regulations. “If tariffs are the price we have to pay to leave the EU, well so be it,” said Bamford. In doing so he referenced a Civitas report produced this week that projected a £12.9bn annual tariff for the EU in the event of a hard Brexit, compared with a £5.2bn tariff for UK based firms, which could be seen as supporting the UK’s forthcoming negotiations. JCB announced last month that it was leaving the CBI over the industry body’s anti-Brexit stance.
Richard Pickering, Head of UK Research & Insight.