Commenting on the Biden victory in the US election, Dr Walter Boettcher BA, Colliers’ Head of Research and Economics, UK says:
“From a UK perspective, I do not think that the election outcome changes much in the short-term. I am not convinced that an advantageous trade deal will be immediately forthcoming from a Biden administration. If there are benefits, it will be that Biden re-confirms America’s commitment to globalism and brings China slowly back into the fold. As an open trading economy, the UK will be well positioned to benefit. From a commercial property perspective, the UK will also benefit as the Atlantic Anglosphere seeks new ways to engage with the EU and new business opportunities arise therein. The UK’s traditional role as a bridge to Europe will change but will not disappear and this will support both UK property investment and leasing markets.
“Biden’s victory comes as a no great surprise given the extraordinary voter turnout that is one of the highest in the last 100 years. The expectation that this voter surge was a positive sign for the Democratic Party proved correct. In some respects, and certainly in the short-term, it will be business as usual, as Biden forms a new administration and begins to assess what he understands as the damage that has been done to international relationships over the last four years. Progress will be slow.”
Three key indicators for UK commercial real estate:
- International outlook
International market metrics suggest that this result was largely already priced in. Sterling and the US dollar have moved relatively little and share indices are up slightly as the anticipated failure of the Democrats to win control of the Senate suggests that radical change in fiscal policy is unlikely and that threats to the tech sector may be diminished. Real assets will be buoyed as further US fiscal stimulus is supplemented by QE and accommodative monetary policies that keep interest rates very low, hence further impetus to the international search for yield. In this context, the UK’s property market metrics are comparatively favourable, especially for long-term investors looking for prime property with reliable income streams. Yield compression was already evident in September and October as cross border investors returned, driving up investment volumes. A new Biden administration is unlikely to change this dynamic.
- Trade deal
A Biden administration is also understood by many to mean that a US/UK trade deal may not be progressed as enthusiastically as by a Trump administration. Given Trump’s ‘America First’ ethos, it is hard to conclude with any certainty that the US would ever have offered a deal that is advantageous and acceptable to the UK, especially given the domestic politization of UK healthcare and food hygiene issues. There is evidence that Biden may also prove to be protectionist and that the price of a deal with the US, political and otherwise, may be too high and the benefits too marginal for the UK. Biden may seek to set up parallel trade deals with both the EU and UK after the terms of UK/EU trade is finalised.
- Relations with China
If there is an upside to a Biden government, it is the possibility of a reconstituted renewal of the US international leadership and a commitment to multilateralism, international agreements and protocols. Wedged as the UK is between East and West, a Biden rapprochement with China could obviate the need for the UK to choose sides. Given the UK’s position as a liberal open economy it stands to benefit from a reinvigoration of global trade and a more benign view of Chinese aspirations. In turn, this could give rise to a renewed Chinese appetite for UK investment at a time when the UK will be looking for large-scale partners to push forward its regional development strategy in what is hoped will be a post-pandemic world.
Dr Walter Boettcher concludes: “Despite its exit from the EU, the UK looks set to remain a bridge to Europe for American companies. The large global technology companies continue plans for further UK expansions in what they see as a gateway hub that already possesses a critical mass of expertise to push their agendas forward. EU regulatory structures remain fragmented and internal politics too opaque to offer regulatory certainty for many multinational companies. In many ways, as the UK steps back from EU membership, Ireland may find itself well positioned to step forward into the role of an American protagonist in the EU, especially given the ‘special relationship’ that Ireland may have with President Biden. This has repercussions that will reverberate across the Atlantic Anglosphere offering new opportunities for business investment and partnerships.”
