On 21st February, we were delighted to host an insightful event with David Smith, Economics Editor of the Sunday Times. David has been Economics Editor since 1989, which means he’s covered the term of six Prime Ministers, seven Chancellors of the Exchequer, but just three James Bonds. He is well versed in UK Economy and where it currently stands in the world context.
If you couldn’t make the event, here are the top takeaways:
It’s not all bad
- The world is clearly in growth mode – at 3.7% pa. The developed world is growing at a modest 2.3%, whilst the emerging markets and developing world are growing by a more impressive 4.9%. The robust nature of the world around us, David assured, gives the UK a good degree of protection from a dramatic change of fortune at home.
- The UK is also in positive growth territory. Despite Remainer predictions, we are ahead of all of their forecasts; growing at probably two-thirds of the rate that we would be enjoying without the shadow of uncertainty that Brexit casts over our personal and business lives on a daily basis.
- Whilst the bank rate is set to rise this year, perhaps to 1% by the end of the year, the best estimation is that we will progress with a series of increases starting in May to reach a new normal of 2-2.5% in due course. Whilst these would be high compared to the last 10-year average, this is a level which we had not been seen before the Great Financial Crisis of 2008/2009.
- At around 4.5%, the UK is also enjoying the lowest unemployment of any developed nation. Since the Great Financial Crisis, we have created 3,000,000 new jobs, countering the 500,000 lost from the public sector since “austerity” began.
- Real wage growth low, however, and this is impacting consumer confidence at present, which is likely to improve as inflation falls at the end of the year towards the 2% Government target.
The ‘B’ word
- Whilst businesses have created jobs, they have held back on major investment plans as they wait and see what Brexit brings. The view is that there will be an agreement to extend the transitional period to the end of 2020, although there is a huge amount of ground to cover in that time.
- The ‘B word’ has kept the pound at historically low levels against the dollar, euro and world currencies, which impacts the pricing of imports but does help exporters.
- All of these factors strongly support a high yielding sector such as Real Estate in its various forms, particularly the higher yielding commercial sector.
Oh, Jeremy Corbyn – the fly in the ointment
- While uncertainty emanates on a daily basis from Downing Street, the bigger challenge comes from the opposite side of the House. Jeremy Corbyn is known for his highly aggressive anti-business rhetoric; only recently he announced a very restricted future for the City. However, none of this dialogue seems to have dented his strong support.
- This is the one very real fly in the ointment for our sector, and there is little we can do to control it. A Labour Government would have a very considerable impact on the UK capital markets, ours included, which would take a long term to resolve.
- There is a view that the electorate might be emotive but are ultimately unlikely to endorse such a radical change of political agenda. No one of course knows the answer until we go to the polls which is not planned until 2022.
Our auctioneers give their view on ‘The five things to watch out for in 2018’ in relation to the commercial and residential property markets. Click here to download
Watch our series of Q&A with David filmed after the event.
Notes to editor
Allsop is an independent property consultancy with a market-leading reputation for high quality service, integrity and innovation. We are also well known as the UK’s largest and most successful auction house. Our success is built on over 100 years’ experience in commercial and residential property consultancy and sales.
For details visit www.allsop.co.uk
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