Uncertainty over what Brexit means for the capital has seen over £650m of property deals collapse in London since last week’s referendum vote.
Germany’s Union Investment fund has backed out of advanced negotiations to purchase Canon Place in the City of London which would have been one of the largest in the UK in 2016. Several other deals also fell through including the London HQ of Eversheds solicitors and the barrister’s chambers at 1 Chancery Lane. In addition doubts have also been expressed about the £450m sale of One Cabot Square.
Worries that financial services companies may reduce their staffing levels on London has led to a range of deals stalling until there is greater clarity over the UK’s future access to European markets.
Investment in UK real estate almost halved in the six month run up to the referendum; down to £7.5bn from £13.3bn in the same period in the previous year.
BUSINESS FORUM COMMENT
The UK has been the largest recipient of foreign direct investment [FDI] of any country in the European Union over the past decade with £21 in every £100 of FDI coming to the UK. This has ranged from French companies investing heavily in the north east [Nissan owned by Renault] and German companies investing in the south east Mini owned by BMW]. But FDI of various kinds, not just property sales, will stall until the UK’s access to the single market is clear which could take at least two years and possibly a lot longer to negotiate.
Meanwhile the continuing weakness of the £ sterling will increase the cost of imports pushing up inflation and possibly undermining consumer confidence. Since the improvements in the post-recession UK economy have been based almost entirely on consumer expenditure this could be bad news for our recovery. On the positive note, the weak currency will make our manufactured goods cheaper possibly boosting exports [but sterling's weakness after the 2008 recession did nothing to help exports].
Sterling's decline should also prove to be a boon for 'staycation' tourism. At least this will be good news for Brighton if not for Benidorm.
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