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.
A new political landscape “In June people voted for change – and a change is going to come”. Theresa May’s comments perhaps hint not just at Brexit, but also at a more radical reshaping of the UK’s political landscape. As Jeremy Corbyn sets about reforming the shadow cabinet in his own metropolitan socialist image, the Conservatives under May appear to be repositioning the party into the populist space vacated by Labour. The Tories will be “the party of the workers, the party of public servants, the party of the NHS”, says May. Long seen as the party of business, the hard Brexit rhetoric and unstable political climate will be concerning to the City. Meanwhile, rumours emerge of a potential comeback by Tony Blair…
‘The biggest challenges remain ahead’ So states the International Monetary Fund when referring to Brexit in its annual Global Financial Stability Report, published this week. Whilst noting that in the initial period of volatility, “no major disorderly market events surfaced, other than a sharp sell-off in some U.K.-based real estate funds”, the report concludes that there remains a “high degree of uncertainty” looking forward. There is reference to the potential impact on the UK’s external current account if foreign investors withdraw from the UK property market. However, Brexit is a relatively small note in the context of the anticipated “low and negative policy rates and flat yields” which could require “deep rooted reforms and systemic management” of Europe’s banking sector.
Software and hard Brexit Talk of a hard Brexit and leaving the single market is usually considered pejorative to UK business, but we should not forget that in any scenario there are winners and losers. The contrary arguments revolve around the opportunity to deregulate, and the potential to refocus immigration to come from wider geographies, with deeper talent pools. This may benefit sectors such as Fintech concludes a report commissioned by TheCityUK. However, this is at the margins. The report also concludes that the loss of UK finance jobs could stretch from 3,000 to 35,000 depending on the degree to which market access is preserved, with wider ecosystem impacts. Food for thought for Theresa May.
Malls fall Our research shows that shopping centre investment volumes have moderated considerably both before and in the aftermath of the referendum, with y-o-y figures falling by 90% in Q3. The complexity, duration and buyer pool for shopping centre transactions are factors that have led to increased deferral and in some cases renegotiation as the implications of Brexit are factored in by both buyers and sellers. As the path now becomes a little clearer, shopping centre volumes are likely to recover somewhat. Interestingly, local authorities have accounted for almost 20% of all buyers so far this year. With local priorities and central funding undergoing reflection in the post-Brexit world, it remains to be seen whether this trend will continue.
Richard Pickering, Head of UK Research & Insight.