Reading signs, making plans

Lords and ladies.  Brexit means Brexit. Or maybe not. The constitutional basis for Brexit has not yet been resolved it would seem, amid debate over whether there is a need to bring the invocation of Article 50 before Parliament. The majority of MPs are Remainers, but ones which are unlikely to go against the wishes of the electorate. The Lords on the other hand have a freer hand in such matters, and at the very least could add significant delay to the process of ratifying the exit. Regardless of the proposed constitutional review of the position in autumn, the timeframes for invoking Article 50 appear to be drifting, as the key principles of the negotiations and the identity of those that will negotiate them still lack clarity.

Digital headwinds.  The UK’s largest retail bank, Lloyds, announced that it is to cut a further 3,000 jobs (from a workforce of 75,000). The announcement coincided with a comment from CEO Antonio Horta-Osorio about the prospect of slow growth attributable to Brexit. However, in a reminder that there are stronger headwinds than Brexit, Horta-Osorio confirmed that this was a pre-referendum decision, based on the trend to digitalisation of retail banking. This decision will be more impactful on the UK’s high streets where a further 200 branches are to close, than the City of London office market.

The long and short of things.  A soon to be released survey of investors carried out by C&W shows that in spite of short term negativity, the long term sentiment for UK property in fact remains stronger than for that of the wider EU.  In the same survey 28% of investors revealed an intention to sell some UK stock during 2016. This compares with our pre-referendum survey where the same figure was 11%. Without a compulsion to sell in most cases, the market response by year end will likely rest on pricing expectations over the medium term.

Whisky and waxworks.  As H1 results come in, a clearer picture of the impact of Brexit on UK business emerges. And for some there is cause for celebration.  In particular, exporters have taken a fillip from the currency position. Shares in previously troubled Derby-based Rolls Royce surged 19%, making it the best performer on the FTSE 100.  Diageo, the largest producer of Scotch whisky reported higher sales and no negative impact of Brexit, whilst Merlin Entertainment (posting a 5.3% increase in sales) anticipates increased visitor numbers at its tourist attractions over the coming months.


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Richard Pickering, Head of UK Research & Insight

Richard Pickering, Head of UK Research & Insight.

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