Andrew Mackenzie, Real Estate Recruiter comments on the property recruitment market post Brexit
In June, the UK made the historic and politically seismic decision to leave the European Union, in one of the greatest exercises in democracy in living memory. In the immediate aftermath, it was actually quite difficult to assess how this momentous decision would affect the UK Real Estate market. This was for two reasons, firstly, we were and are still in the European Union and in that respect nothing has changed and, secondly, the triggering of Article 50, of the Lisbon Treaty, has yet to occur until at least March 2017.
So let’s stick to what we know. The Brexit vote was unquestionably a major event and only the mindlessly optimistic could suppose that the process of leaving the European Union will have no impact on the UK economy. It’s more a question of how much impact will there be and for how long. The fundamentals of the UK economy are strong and have not changed since the vote. Unemployment in the wider economy has continued to fall to new historic lows ever since the Brexit vote and this is testament to the strength of these fundamentals. In August, Mark Carney, at the Bank of England, took the measure of reducing Interest Rates to bolster the economy and indicated that there may be further cuts to come.
All eyes are on foreign investment
With the Real Estate market in mind, it is important to remember that there is an acute supply shortage when it comes to skills, in the areas of professional services and in property management, in particular, but in other areas too. It is unlikely that any impact from Brexit will impact on the requirement for the skills in these areas. It’s true that what we must watch closely is whether the extraordinarily high levels of foreign investment, that we have witnessed over recent years, starts to fall away with the uncertainty created by the unknowns of Brexit going forward. Probably it will reduce in the short term and if so, this will impact on our clients’ requirements for Asset Managers, Development Managers and Analysts but it is also still true that Real Estate and UK Real Estate in particular, remains more attractive than all other investment classes.
With respect to the investment market, there are certainly many who have pointed to the negative impact in the immediate aftermath of the Brexit vote but it is also true that a correction was expected, in any event, prior to the vote and perhaps the vote has simply brought this forward. Either way, a correction was widely predicted regardless of Brexit. There was considerable reporting by the press regarding redemptions in retail funds but the reality was somewhat less apocalyptic than the lurid headlines would have had us believe. The FTSE 100 has recovered to pre-Brexit levels and the FTSE 250 remains only slightly down at the time of writing. The devaluation of Sterling is very much a double-edged sword but it does make UK Real Estate cheaper for foreign investors, as well as UK exports.
With respect to the political landscape, much has changed since the referendum. It wasn’t that long ago when significant change seemed to be a daily occurrence. Most significantly, other than the shock of the result of the vote itself, the Cameron / Osborne axis came to an abrupt end with David Cameron’s decision that new management was required at No.10 post the vote.
The Conservative Party’s ability to reorganise themselves in quick time and provide, much needed and fresh leadership, at this crucial time in our country, was well received by the markets and frankly has been an example to the world, as well, of course, to the Labour Party. The coronation of Theresa May, a highly experienced and able politician with a renowned eye for detail has provided the confidence required, by the country, that a firm hand remains on the UK tiller. And let us not forget to celebrate the UK’s second female Prime Minister .
Positives and small victories
The truth is that, in spite of the widespread doom-mongering, Brexit is not akin to the collapse of Lehman in 2008 and nor will it be. The Institutions of our country are world-class, as are the fundamentals of the economy and for most of our clients, investment in Real Estate is a mid to long-term business. Indeed, it has been reassuring to hear from many of our clients, post the vote, that they expect little or no impact at all from the fallout of Brexit.
It’s certainly true that August was a quiet month for us but it often is - with so many of our clients and candidates heading off to sunnier climes - and so the Olympics were a welcome distraction. The country enjoyed a fantastic run of success by our Olympians and our para-Olympians who came second overall in the competition, an achievement that we should all be deeply proud of. But it’s not just a point of pride. These fine British Olympians are an example to us all, of what our country can achieve and of the fine men and women that we are able to produce to compete and succeed at a global level. And so it can be with Brexit too. So in a nation where being seduced by the siren-song of the power of nightmares is, frankly, a national pastime, we must temper all our concerns with at least some positive and optimistic sentiment about a post-Brexit UK. So let us take the positives and the small victories to temper any underlying gloom.
In summary then, in spite of the Brexit vote and the political volatility that ensued we have not felt too much by way of negative effects but this is mostly because we remain in the European Union and have not triggered Article 50 of the Lisbon Treaty until March 2017. In fact, we may not see too much in the way of significant change until the renegotiation with the European Union begins in earnest but thus far, it seems as if Mrs May has her hands firmly on the UK tiller and is doing exactly what is required of her by steadying the buffs.
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