Jonathan Rumsey, Associate Director – Retail Market Analysis at Cushman & Wakefield – looks beyond the uncertainty of Brexit.
In the immediate aftermath of the vote to leave the EU, the UK political and economic landscape was thrown into turmoil. The vote triggered the coronation of a new prime minister and sent financial and currency markets into a frenzy.
Since then the most common word to answer questions on Britain’s future post-referendum is ‘uncertainty’. However, since the initial turmoil and decline in confidence from consumers, retailers and investors alike, what has actually changed for the British consumer so far? Until Article 50 is invoked (likely, but not certain, to be early next year) we are still in the EU, and will remain so throughout the years of negotiations.
In fact, consumer confidence has begun to make up ground on the immediate decline following the vote. Even with the decline, retail sales continued to show strong volume growth across various surveys. Yes, some retailers have adopted a ‘wait and see’ approach which may slow down leasing activity in the short-medium term. And investors have certainly become more cautious with investment volumes down pre and post referendum. But domestic consumer demand for retail and leisure has nonetheless held up, helped by extremely low interest rates and high employment levels.
And from an investment perspective, even ignoring the boost foreign investors will gain from sterling’s depreciation, retail property yields look extremely attractive when compared to government bond yields. They have, in general, softened 25 bps since the EU referendum.
Inflation is forecast to tick up next year due to sterling depreciation which may slow retail sales growth – but the key word here is still growth. Since the shock waves of 2008, retail has adapted to take into account changing consumer trends and is in a very healthy position to deal with potential changes to tariffs, supply chains and currency volatility. Although ‘uncertainty’ will remain my main answer to the question posed, I shall be taking the approach of many and carrying on as normal.
Head of UK Retail Market Analysis