Following the Office for National Statistics’ announcement that the UK economy grew by 15.5% q/q in the third quarter, Colliers International’s UK deputy chief economist Oliver Kolodseike has made the below observations.
“While the headline figures look very impressive at a first glance, we must not forget that GDP fell at a record rate of 19.8% q/q in Q2 and the size of the economy is expected to remain below its pre-coronavirus level until 2022. Growth in the third quarter can be attributed to the re-opening of non-essential businesses and August’s Eat Out to Help Out scheme, with output in the accommodation and food services sector rising more than five-fold in the three months to September.
“While business survey data was positive in October, the renewed national lockdown measures introduced across the four nations in October and November pose a threat to the Q4 GDP figures, which we believe, have a very high chance of being negative. This does not mean that the UK will enter what many call a double-dip recession though, as growth is likely to resume in Q1 2021.
“Given the triple whammy of the US election results, the potential of a vaccine and the strong possibility of a Brexit deal being reached, for the first time since the start of the pandemic, we now believe that risks to the economic outlook are tilted to the upside. We may therefore see even stronger 2021 growth than most forecasters are currently predicting – which the Bank of England will also welcome after their recent announcement of an additional £150billion of quantitative easing.
“Financial markets have responded well to the US election and COVID-19 vaccine news which will of course be welcome news to investors. Since the end of the first lockdown the commercial property market has seen a pick-up in investment activity and we believe that momentum will continue with the typical end-of year surge. Investor interest for prime office assets, supermarkets, logistics and PRS schemes will remain particularly strong. Given the high degree of economic uncertainty we have experienced throughout most of 2020, it would be a good result if commercial property investment volumes reach £45billion by the end of the year, which would be down by only 15 per cent on 2019 results.”
