South: Property sector comments on Theresa May’s Brexit speech
A final Brexit deal will mean a clear departure from the single market, as staying in “would mean not leaving the EU at all,” said prime minister Theresa May. Key members of the UK commercial property industry offer varied reactions to her Brexit speech.
Melanie Leech, chief executive, British Property Federation, said: “Real estate contributes £94 billion annually to the UK economy, representing 5.4% of GDP, and, in Theresa May’s Brexit speech, we are pleased to see that the Government is focused on ensuring as much certainty as possible, which will support our industry to drive forward much-needed growth across the UK.
“As negotiations unfold, we also ask the Government to not overlook ongoing fundamental issues such as the UK’s overly complicated planning system. It is not adequately focused on delivery, with resourcing in Local Authorities continuing to decline, which continues to negatively impact the country’s development pipeline.
“The Government also needs to provide a stable and predictable tax system that encourages both UK and foreign investment, including simplifying VAT to incentivise development and renovation activity.”
Knight Frank’s chief economist James Roberts said with much of the capital coming from outside of the UK, investors are already looking beyond Brexit: “They believe in the UK’s long-term fundamentals as a business location, and consider the recent fall in the pound as an opportunity to buy at a discount.
“This new international capital is less concerned over single market access, and will take comfort from talk of new trade agreements with growth economies elsewhere in the world. After all, that is where much of this money originates from. For commercial property the initial referendum shock back in July 2016 has now passed over, with certain sub-markets like offices in London’s tech districts showing signs of moving into the next cyclical upturn.”
However Miles Gibson, head of UK research at CBRE warned that the UK’s plans to leave the customs union could further impact business confidence: "Businesses will be pleased about the PM's acceptance that a transitional period will be required, but overall the decision to reject full membership of the customs union will make many in the industry even more nervous. All eyes will now turn to the contents of the proposed Free Trade Agreement, and in particular how that deals with the UK's financial services sector."
Paul Firth, national head of real estate at Irwin Mitchell, said the continued weak pound will benefit foreign investors in UK property, both commercial and residential.
"However, this investment windfall may take time to materialise; in the quarter following the referendum, RICS reported that foreign investment in the UK dropped by 27%.
"A weaker pound also makes the UK more attractive as a tourist destination, which impacts on the hotel industry and certain retailers. Manufacturers will find imported materials more expensive but conversely their exports will become more competitive. Some sectors, such as technology and construction, will be concerned that the end of freedom of movement across the EU may limit their access to talent. The impact on the logistics sector could also be significant; more complex import rules could make it more expensive and time-consuming to process imports. On the plus side, this could lead to an increased demand for warehouse space to allow for more goods to be stored onsite.
"Property investors are enjoying mixed fortunes and many are yet to fully recover the ground that was lost in the immediate aftermath of the referendum. Those with exposure in the City and West End will continue to monitor closely whether financial companies do start to exit London.
"With EU exit negotiations and trade deals likely to take years to complete, uncertainty will continue for some time to come. The precise impact of a hard Brexit will vary, not only from sector to sector, but also from business to business and, in that environment, property investors will see as many opportunities as there are threats."
Credit: CoStar
