Dr Walter Boettcher, Colliers International, Director of Research and Forecasting Commenting on UK PM’s Keynote Brexit Speech:
As a property analyst, I track the government’s pronouncements on BREXIT and other macro-narratives with a keen interest. Seldom do I expect, nor do I find, comments that address the property sector directly, but like other analysts, I look for remarks suggesting indirect influences on the fortunes of property. In this context, Theresa May’s speech had few surprises.
Her speech looks to have buoyed business confidence in the UK substantially. Sterling’s post speech rally suggests that markets are happy that no new surprises emerged, but also that Theresa May effectively argued that the UK has a strong position due to the reasonable assumption that the EU has much to gain in terms of trade reciprocity.
The speech looked to be targeted more at European critics of the UK, than at UK interests. She argued that the UK vote to leave reflected the electorate’s wish to exercise its own parliamentary democracy and legal powers unencumbered by EU law and institutions. She argued further that the EU did not prove flexible enough to accommodate the diversity of its members, an eloquent reminder of the EU’s ultimate vulnerability.
For these reasons, Theresa May will pursue a ‘clean Brexit’ and leave the single market and customs union so as to be able to negotiate new global trade relationships unfettered by EU ties. Since the apparatus for free trade with the EU is already in place, Theresa May suggested that negotiating a new trade agreement should be manageable within the two year time frame. In the absence of a trade deal, the UK would revert to WTO rules. ‘No deal’ would be better that a ‘bad deal’.
Despite these reassurances, there is no detail as to how the final agreement will look, although Theresa May has agreed that parliament will have a final vote on the agreement and that any such agreement would be accompanied by a staged transition. This sounds good, but may be less meaningful than the initial act of invoking article 50 which remains subject to an imminent UK Supreme Court judgement.
For commercial property, the real issue is related to investor and corporate decision making and perceptions of risk. These worries are already evolving. A primary worry from the beginning has been financial services and EU market access via ‘corporate passport rights’. Already, the main City lobbying group has said that this is not really the issue, that ensuring market access through ‘regulatory equivalence’ as is practiced by non-EU members such as the US, is paramount. Given a few recent high profile lettings in London, it looks increasingly like any lingering weakness in the London rental market may prove to be more cyclical than political. Business impatience to move forward with their business plans may already be impacting. The latest economic survey data is heartening suggesting that order books are back to levels not seen since the beginning of 2016.
On balance, Theresa May’s speech looks to have buoyed confidence. What is perhaps of greater concern is what Trump may set out in his inaugural address on Friday. Whatever it is, he will probably describe it as ‘beautiful’. Let’s hope it is.