‘Recovery looks like the Real McCoy’

‘The recovery is here!’ So pronounced Roger Bootle after apologising in advance for not being his usual ‘bearish’ self. Not only is a short-term improvement likely, but Roger was very optimistic about the UK’s medium term prospects. He was very pleased to have a new Bank of England Governor and an end ‘... to the obsession with targeting short-term inflation’. He also noted that it was a remarkable co-incidence that the recovery seemed to be strengthening just in time for the next election. Downside risks were still apparent, but in short... Roger was very positive!

The ‘Up’ sides

  • Emerging markets, the Eurozone and US will all continue to support growth, but it will not be ‘runaway growth’.
  • Inflation is benign due to commodity price pressures easing. This will support positive real wage growth from mid-2014 and buoy confidence and spending. UK rental growth will return in 2014.
  • Economic rebalancing is occurring through a pick-up in exports, manufacturing and investment.
  • Rebalancing is essential to ensure that recovery reaches the wider UK regions. Domestic facing firms are showing signs of improved confidence with investment intentions rising.
  • London will continue to attract ‘safe haven’ investment flows due to the enormous wealth creation in Asia.
  • Interest rates will remain low despite an economic pickup. House prices are rising and affordability is not an issue in the short-term.


The ‘Down’ sides

  • Energy prices remain a risk and are impossible to predict as they are impacted by political events.
  • Rebalancing very sensitive to UK competitiveness and exchange rates. Currency rates, including sterling, are very difficult to forecast, but it looks as though the rate will be managed.
  • Eurozone economies may be strengthening, but the financial crisis has not gone away. Roger thinks we could still see at least one exit, but is most concerned about Italy, due to the size of the economy.
  • Further recovery will give governments greater confidence in pushing through further regulatory reforms for the financial system which will act to moderate growth over the medium term.


Walter Boettcher's view | Colliers International

I was surprised by Roger’s abrupt change in sentiment, although it is still a sober view. Greatly relevant for Colliers International is the growing evidence that UK facing businesses look likely to be on the cusp of expansionary investment. This is essential to recovery of occupier markets outside of London. Roger sees the real turn in fortunes in mid-2014. I agree and think that 2014 will be strong year for UK commercial property.