New New Labour? “They will say Leaving is inevitable. It isn’t.” Tony Blair has jumped back onto the UK political stage with a firmly pro-EU rhetoric, which may chime with some Labour voters who feel ignored by Corbyn’s support for the EU Bill. Blair blames ‘the absence of an opposition which looks capable on the polls of beating the Government’ and, in so doing, raises speculation of the potential for a new political party which would stand on pro-EU ticket. The last time that a major new political party was formed in the UK was in 1988 (the Liberal Democrats), which itself rose from the ashes of the SDP. The SDP of course was founded by four former Labour politicians who left the party because they believed it had moved too far to the left, and because it had committed to withdrawal from the EEC. Sound familiar? However, we are unlikely to see Blair back at the helm. He currently has odds of 200/1 to be the UK’s next Prime Minister – the same as Simon Cowell and Wayne Rooney.
Business Rates With two weeks to go until the final Spring budget, lobbyists (inc Mary Portas and Sainsburys CEO Mike Coupe) are putting greater pressure on the Chancellor and Communities Secretary to find a solution to the looming business rates hike. The vast majority of businesses in the UK (75%) will see no negative impact of the revaluation, with rental growth having being typically sluggish across the UK over the period of assessment. However, for some assets (particularly in London’s rapidly rising tech belt, and the capital’s prime retail streets), the revaluation could raise rates by 100% and over 200% respectively. Whilst it is unlikely that there will be significant reform of proposals, the Prime Minister has today provided hope for some small business, stating that there should be ‘appropriate relief in those hardest cases.’
Traffic Jams A report this week by INRIX shows that UK has the third worst traffic congestion in Europe (fourth in the developed world). In London alone, this is thought to cost the economy £6.2bn pa in fuel, wasted time, and freighting and business costs. Manchester, Aberdeen, Birmingham and Edinburgh rank the next worst. Making our cities accessible and attractive places to work is surely critical in the face of global (and regional) competition for talent. INRIX Chief Economist Graham Cookson advocates remote working, congestion charging and big data led traffic management as solutions. The former is a growing trend. A report by the TUC last year suggested that 250,000 more people work from home than was the case a decade ago. Offices will increasingly have to offer more than a place to sit if they are to be seen as an attractive alternative.
Fair Value Some commentators have suggested that there exists an inflated discount for UK corporate bonds following the Brexit vote, which overexpresses the credit risk. Meanwhile, our analysis of the spreads between commercial property and fixed income measures shows that UK real estate pricing is currently ‘attractive’ when compared with long term averages; This compares with 2006 and 2007, when real estate pricing was ‘expensive’. Real estate is of course less liquid and more risky than fixed income, and with capital appreciation less likely in the short term, its key relative advantage is subdued. However, the prospect for lower yields in the bond market can only support the pricing of UK real estate.