Dr Walter Boettcher, Chief Economist at Colliers International has commented on Chancellor Rishi Sunak’s announcement today.
He said: “The Chancellor’s emergency plans look to be based on the assumption of continued recovery, rather than mitigating a new downturn. The latest data suggests that Q3 2020 will see positive GDP growth. Further support for the economy though is welcome and was anticipated by many as part of either an Autumn Spending Review or Annual Budget. This was not to be and, unfortunately, the Government is still shackled by its virus response and unable to progress its potentially transformative infrastructure and regional investment programme.
“The good news is that the new Jobs Support Scheme and other measures to support business cash flows, including the ‘Pay as You Grow’ loan extensions and reduced VAT extensions, is financially sustainable. Despite net debt rising to over 100% of GDP, interest rates are very low and interest payments were falling in Q2 both in absolute terms and as a percentage of central government receipts.
“Unfortunately, the new advice to ‘work at home if possible’ will flatten the trajectory of recovery as ancillary economic activities dependent on office working loses momentum. While business and financial services (including real estate professional services) will continue to be relatively resilient, the incipient recovery in the ‘bricks and mortar’ consumer economy may stall.
“Before the latest statements, commercial real estate transactional markets looked poised for a reasonable year end. International travel may remain impaired, but physical access to assets has improved and an investment appetite is undiminished. Furthermore, market metrics are still favourable for the UK. Undervalued sterling and international yield arbitrages still offers advantages for cross border investors and debt is generally available. Questions about the sustainability of property income streams remain, but this may eventually prove to have been a short-term issue in a long-term market.”
