By Will Leyland, 16 May 2017
The one year anniversary of the referendum on membership of the European Union is fast approaching. Following on from a 2012 promise by then-Prime Minister David Cameron, the referendum was to be held on 23rd June 2016 and an easy victory was expected for ‘Remain’.
As the vote approached it became clearer and clearer that the voting intention was going to be much closer than anybody had expected with ‘Leave’ polling better with every passing week. As the Leave vote started to become a reality and it hit home that the Downing Street press machine was failing to cut through to voters, the Government team decided to bring out the big guns and started to start a campaign warning of doom the likes of which would be even worse than 2008. Almost a year later we can see that the truth will broadly lie somewhere in the middle.
The Economy
In purely economic terms, thinking about Gross Domestic Product (GDP) the picture so far has been surprisingly upbeat. Bearing in mind that many were predicting immediate and noticeable drop offs for many headline economic indicators, we can say with a level of confidence that the UK has outperformed most of the predictions pre- and immediately post-referendum.
According to the Office for National Statistics (ONS): “The fall in the value of sterling has so far had little effect on prices. Prices of material and fuel purchased by producers – “input prices” – increased in July and August at about the same rate as in the previous two months; 12-month growth rates have accelerated but mainly as last year’s sharp declines fall out of the calculation. There is also little sign yet of an effect on factory gate or consumer prices. In addition, house prices continued to grow strongly in July, albeit at a slightly slower annual rate due to last year’s price changes, with annual growth falling from 9.7% in June to 8.3% in July.”
GDP growth since the referendum has varied anywhere between 0.6% in July 2016 to 0.7% In January 2017, whilst growth for the next quarter has been predicted at 0.3%. Meanwhile, unemployment sits at an almost historically low 4.7% whilst inflation is showing at a slightly higher than desirable 2.7%.
All in all, economic performance has been better than predicted and job growth and economic output as well as overall national confidence remains high. Overseas investors are showing no signs of pulling their money from the UK and it’s safe to say that UK property remains a mainstay of most foreign investment portfolios.
Property
UK property has been performing very well indeed. For instance, residential properties have been seeing price rises on average of over 8% annually. Manchester in particular has seen its property market outperforming the whole of the UK. Research compiled by Hometrack shows that the average house price in Manchester is now £153,600 with the surge in growth at 8.8% compared to a year earlier. It also said that in Manchester, Newcastle and Birmingham, annual house price growth had lifted to levels not seen in these cities since 2005.
It’s not just residential property seeing a surge of interest, with off-plan properties and new constructions becoming increasingly popular since the referendum as well. One of the country’s largest house builders, Persimmon, has reported ‘excellent’ trading for the year to date, with its new builds around regional communities such as around York, Leeds and Sheffield attracting a lot of interest in comparison to last year. The York based company reported 6% more visitors to its show homes and development sites across the UK compared with the same stage last year. Total forward sales revenue is predicted to be £2.56bn, 11% higher than the same stage last year. In terms of actual sales, the group said it had sold 8,928 homes to private owners with an average selling price of £229,500, an increase of 4.1% from the last 12 months.
New build apartment developments have seen popularity soaring too, with overseas investors now piling in to the UK property market as the good value Sterling exchange tempts them into one of Europe’s most reliable performers.
Negotiations
It looks set to be a rocky road, with Prime Minister Theresa May and European negotiators trading angry rhetoric with the lead up to the general election in June. May has accused the EU of trying to interfere in the general election by releasing reports that her dinner with Jean-Claude Juncker, one of the heads of the EU, had been very frosty with Juncker accusing May of being ‘from another galaxy’.
So far there has been quite a lot of wrangling surrounding the so called ‘divorce bill’ that the UK will be expected to pay to separate itself from the Union. Some in the EU have been reported as demanding 100 billion Euros, whilst the UK government insists it won’t pay that much.
There is expected to be fierce negotiating regarding the rights of UK and EU nationals in each other’s territory as each side seeks to retain the best possible rights for their citizens.
So far, it must be said, it has gone exactly as expected with both sides trading strong rhetoric about getting the best deal but it’s still very early days and little should be read into the posturing until things get properly underway later this year and early next year.
Still to come
The upcoming General Election on 8th June is likely to set the tone for EU negotiations with Theresa May insisting that a vote for her will strengthen her negotiating hand against Europe. There’s a grain of truth in it too as the EU cannot claim that May has no mandate to demand certain terms from the negotiations.
However, it should be stressed that these are uncharted waters and aside from an educated guess it’s really quite hard to say how both sides will respond.
Aside from all this though, the UK has performed strongly so far and there aren’t really any significant indicators that this is set to change. Investors who already have interests in the UK and those pondering whether to get involved should see the figures above as a strong indicator that the UK should continue as it’s started post-referendum strongly.