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Headwinds, High Speed and Happiness

By Richard Pickering, Head of Futures Strategy

Exodus and Numbers  In the immediate aftermath of the EU referendum, doom-mongers had already written off the UK financial sector, and calculations were being made over whether the tech sector could pick up the slack. Since then, the manifest challenges of repatriating the finance industry have been drawn into sharper relief, together with a general reluctance by the big banks to effect moves. Furthermore, time has allowed a period of reflection around potential workarounds, in spite of passporting rights looking less likely to materialise after the transition period. This week a Reuters survey of 119 firms reveals that the number of forecast financial job relocations has halved relative to expectations just 6 months ago, and that London will now ‘comfortably remain’ Europe’s largest financial centre post Brexit and a top contender on the global stage. Nevertheless, Paris’s targeting advertising appears to have paid off relative to its continental counterparts, as an increasing share of any relocations will now likely land there. As the EU negotiations and positioning start to appear more positive, eyes should perhaps look further afield. We are exiting the bloc and looking to negotiate terms with new partners at a time of increased global protectionism and tough talk on trade.

Headwinds and tailwinds  In a speech to the CBI last week, BoE Monetary Policy Committee Member Gertjan Vlieghe struck an upbeat tone on the future of the UK economy. Discussing a more symmetric arrangement of upside (global growth) and downside (inflation / Brexit) risk, driven by a broader based global economy and greater investment-driven growth, Vlieghe envisaged a more positive outlook. On the domestic front, the Brexit impact has (rightly or wrongly) already been factored by currency and equities markets, but with potential for good news. Meanwhile lower unemployment is putting upward pressure on wages, whilst wage headwinds such as public sector pay restraint and weak productivity are easing. The policy implication is that this puts us on a path of continued withdrawal of monetary stimulus (increased base rates) driven by the expectation of growth rather than Brexit related inflation, which appears to have now peaked.

Pipe dreams  I’m a big fan of Elon Musk’s infrastructure ambitions, and their potential impacts on our cities and real estate. These are no longer just pipe dreams; Musk is down to a shortlist of two to deliver a scaled down form of ‘high speed loop’ between O’Hare airport and downtown Chicago. This kind of point-to-point journey is also likely to be the future of its big brother (the Hyperloop) for whom turning and slowing down is still problematic. Meanwhile the future of inner city travel is likely to rest in adapting existing public mass transit modes. In that regard Paris and Germany are contemplating proposals to make all public transport free. With fares only accounting for a small percentage of cost, this is more psychological than financial, however the UK’s already stretched infrastructure budgets may struggle to compete.

Felicidad  Emotions play a key role in convincing people to do things, and have been shown to be much more persuasive than logic or ethos. On that basis, what better place to deploy emotional tactics than in a shopping environment? My Spanish colleagues have just published the results of a c. 5,000 person survey analysing happiness in shopping centres. The research (copy here for capable linguists) finds that 76% of respondents felt happier after visiting a shopping centre, with younger respondents and women markedly more so. In real estate we too often overlook the potential for our built environment to evoke emotions, but herein lies one of its key defences to digitisation. Shopping centre owners could take a leaf from Disney’s book of customer experience; their theme parks’ mantra being, ‘We Create Happiness’ (and in doing so, lots of sales), or John Lewis, which in anticipation of its recent launch at Westfield London has sent 500 employees to acting school, recognising in the words of the trainer that ‘body language, voice and expression are all as important as our words’.

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