Both Great Britain and the EU have agreed to begin discussions via an informal forum on financial services, but the talks are yet to begin. This had led to Britain's finance ministry calling for the EU to expedite financial services talks, after the London Stock Exchange urged the bloc to avoid protectionism.
Britain formally left the EU in January 2020, with the transition period drawing to a close in December. This cut the City of London’s financial services centre off from many of the markets it had previously played a central role in. Pre-Brexit, many banks and other financial businesses used London to access Europe. Since Britain's departure from the EU, many of these businesses have established units in the EU to prevent disruption for their EU clients. This has resulted in London losing out on billions of euros in daily euro stock and derivatives trading, which are now instead going straight to the EU.
The forum will not decide on financial market access, but it is seen as a critical part of reestablishing relationships between Great Britain and the EU.
Amidst the recent shock resignations of Brexit Secretary David Davis and Foreign Secretary Boris Johnson, investment uncertainty, slower economic growth and a weaker pound, the United Kingdom is on its way to a slow but steady Brexit, with negotiations about the future relations between the UK and the EU still taking place.
And whilst the full consequences of Britain’s vote to leave the EU are still not perceptible, Finance Monthly examines the effects of the vote on economic activity in the country thus far.
Do you remember the Leave campaign’s red bus with the promise of £350 million per week more for the NHS? Two years after the referendum that confirmed the UK’s decision to leave the European Union, the cost of Brexit to the UK economy is already £40bn and counting. Giving evidence to the Treasury Committee two months ago, the Governor of the Bank of England Mark Carney said the 2016 leave vote had already knocked 2% off the economy. This means that households are currently £900 worse off than they would have been if the UK decided to remain in the EU. Mr. Carney also added that the economy has underperformed Bank of England’s pre-referendum forecasts “and that the Leave vote, which prompted a record one-day fall in sterling, was the primary culprit”.
Moreover, recent analysis by the Centre for European Reform (CER) estimates that the UK economy is 2.1% smaller as a result of the Brexit decision. With a knock-on hit to the public finances of £23 billion per year, or £440 million per week, the UK has been losing nearly £100 million more, per week, than the £350 million that could have been ‘going to the NHS’.
Whether you’re pro or anti-Brexit, the facts speak for themselves – the UK’s economic growth is worsening. Even though it outperformed expectations after the referendum, the economy only grew by 0.1% in Q1, making the UK the slowest growing economy in the G7. According to the CER’s analysis, British economy was 2.1 % smaller in Q1 2018 than it would have been if the referendum had resulted in favour of Remain.
To illustrate the impact of Brexit, Chart 1 explores UK real growth, as opposed to that of the euro area between Q1 2011 and Q1 2018.
As Francesco Papadia of Bruegel, the European think tank that specialises in economics, notes, the EU has grown at a slower rate than the UK for most of the ‘European phase of the Great Recession’. However, since the beginning of 2017, only six months after the UK’s decision to leave the EU, the euro area began growing more than the UK.
Reflecting on the effect of Brexit for the rest of 2018, Sam Hill at RBC Capital Markets says that although real income growth should return, it is still expected to result in sub-par consumption growth. Headwinds to business investment could persist, whilst the offset from net trade remains underwhelming.”
All of these individual calculations and predictions are controversial, but producing estimates is a challenging task. However, what they show at this stage is that the Brexit vote has thus far left the country poorer and worse off, with the government’s negotiations with the EU threatening to make the situation even worse. Will Brexit look foolish in a decade’s time and is all of this a massive waste of time and money? Or is the price going to be worth it – will we see the ‘Brexit dream’ that campaigners and supporters believe in? Too many questions and not enough answers – and the clock is ticking faster than ever.
Refugee crisis, political turbulences, economic struggles brought on by austerity and Brexit. Katina Hristova explores the crisis that the European Union has found itself in.
"The fragility of the EU is increasing. The cracks are growing in size”, warns EU Commission Chief Jean-Claude Juncker. With Italy’s Government crisis finally being resolved and the country’s shocking rejection of NGO migrant rescue boats, it has been easy to detract from the political earthquake that the third largest EU economy experienced and the quick impact that it had on the Euro. But Europe’s problems go deeper than Italy’s political turbulences. A month ago, Spain, the fourth biggest Eurozone economy, was faced with a very similar crisis and even though the country now has a new leader, analysts believe that the Spanish instability is not over yet. With the shockwaves of both countries’ political uncertainty being felt on Eurozone markets, on top of migration pitting southern Europe against the north and as the UK marches on towards Brexit whilst Trump abandons the Iran Nuclear Deal, which could mean the end of the transatlantic alliance between the US and Europe, is the EU in serious trouble?
Why is it so serious?
Billionaire Investor George Soros is one of those people that can sense when social change is needed and when the current cultural and political processes are about to collapse. A month ago, in a speech at the European Council on Foreign Relations, Soros claimed that: “for the past decade, everything that could go wrong has gone wrong”, believing that the European Union is already in the midst of an ‘existential crisis’. The post-2008 policy of economic austerity, or reducing a country’s deficits at any cost, created a conflict between Germany and Greece and worsened the relationship between wealthy and struggling EU nations, creating two classes – debtors and creditors. Greece and other debtor nations had sluggish economies and high unemployment rates, struggling to meet the conditions their creditors set, which resulted in resentment on both sides toward the European Union. Back in 2012, the European countries that struggled with immense debt, malfunctioning banks and constant budget deficits and needed help from other member countries were Portugal, Ireland, Greece and Spain. In order to help them the creditors countries set conditions that the debtors were expected to meet, but struggled to do so. And as Soros points out: “This created a relationship that was neither voluntary nor equal – the very opposite of the credo on which the EU was based”.
Although Italy finally has a government, after nearly three months without one, the financial markets are apprehensive about what to expect next, considering the country’s €2.1 trillion debt and inflexible labour market. On 29 May, fearing the political crisis in the country, the Euro EURUSD, +0.6570% slid to a six-month low, whilst European stocks ended sharply lower, with Italy’s FTSE MIB I945, +1.43% ending 2.7% lower, building on the previous week’s sharp losses. Bill Adams, senior international economist at PNC believes that: “The situation serves as a reminder that political risk in the Euro area hasn’t gone away. Italy is not on an irrevocable road to anything at this point,” he said. “I think what is most likely is another election later this year, and what we’ve learned is that outcomes of elections are very unpredictable.”
Spain on the other hand has made huge progress since being on ‘EU life support’ when ‘its banks were sinking and ratings agencies valued its debt at a notch above junk, on a par with Azerbaijan’. Since receiving help, the country’s economy has been growing, unemployment is not as high and its credit rating has been restored. However, with the Catalonia separatism, and the parties, Podemos and Ciudadanos who have emerged to challenge the old duopoly between the Popular Party (PP) and the Socialists, the political uncertainty in the country is set to continue.
Greece has been in a permanent state of crisis for a decade now, with its current debt of 180% of its gross domestic product (in comparison, Italy's is 133%). In less than two months, on 20 August, the country is due to exit its intensive care administered by the European Central Bank and International Monetary Fund. The EU will then have to come up with a new debt relief offer on the $280 billion Greece still owes – which could be challenging, as the ‘creditors’ are not in a charitable mood.
In contrast, Poland and Hungary are financially stable, however, both countries seem to be in opposition to the EU with regards to immigration, the independence of the judiciary, ‘democratic values’ and freedom of the press. Both governments have dismissed EU plans to share the burden that the Mediterranean region carries in terms of migrants arriving into these countries. In addition to this, Hungary’s Prime Minister is promoting an ‘illiberal’ alternative to European consensus, whilst Poland has sided with the US and against its European partners on a range of subjects, including the Iran sanctions and Russian gas pipelines.
And of course, let’s not forget the EU’s list of unsolved issues – the main one being Brexit. With nine months until its deadline, the terms of Britain’s exit from the EU are nowhere near finalised.
Make the EU an association that countries want to join again
Today, young people across the continent see the European Union as the enemy, whilst populist politicians have exploited these resentments, creating anti-European parties and movements.
Since its establishment, the EU, an association that was founded to offer freedom, security and justice without internal borders, has survived many turbulences. Although the current crisis is based on a number of deep-rooted problems, odds are that these challenges will be overcome. To save the EU, Soros believes that it needs to reinvent itself via a ‘genuinely grassroots effort’ which allows member countries more choice than is currently afforded.
"Instead of a multi-speed Europe, the goal should be a 'multi-track Europe' that allows member states a wider variety of choices. This would have a far-reaching beneficial effect."
And even though he isn’t offering a proposition for a bill that someone needs to draft and pass as soon as possible, he has opened a conversation - a conversation about moving away from the EU’s unsustainable structure. “The idea of Europe as an open society continues to inspire me”, says Soros. And in order to survive, it will have to reinvent itself.
As we herald a new era of banking, will PSD2 result in FinTechs challenging the dominance of traditional banking services?
13th January 2018 marked the beginning of the Open Banking era. The EU’s Second Payment Services Directive (PSD2) which took effect earlier this month forces banks to allow third parties, including digital start-ups and challenger banks, access to their customers’ financial data through secure application programming interfaces (APIs), and create a new way for customers to bank and manage their money online. If all goes to plan, PSD2’s main objective is to ensure maximum transparency and security, whilst encouraging competition in the financial industry. The Open Banking revolution aims to create a form of cooperation between banks and FinTechs – however, this doesn’t seem to be the case 18 days after the triggering of PSD2, with a number of banks that still haven’t published their APIs and incorporated the necessary changes. Naturally, the directive is good news for the FinTech sector. FinTech companies and digital payment service providers will gain greater access to high-street banks’ customers’ financial data – something that they’ve never had access to in the past. This will then undoubtedly inspire FinTechs to develop new innovative payment products and services and provide users with opportunities to improve their financial lives, whilst allowing them to compete on a more-or-less level playing field with the giants of the financial services industry, the traditional banks. Does this mean that traditional banks will need to up their game when competing with the burgeoning FinTech industry? Are they scared of it, and if not – should they be?
Traditionally, and up until now, banking has always been a closed industry, monopolising the majority of other financial services. The recent advancement of digitisation has shaken the industry, with FinTech start-ups offering alternative solutions to more and more clients across the globe. From a bank’s point of view, PSD2 will forever change banking as we know it, mainly because their monopoly on their customers’ account information and payment services is about to disappear. Banks will no longer be competing against banks. They will be competing against anyone that offers financial services, including FinTechs. And even though the directive’s goal is to ensure fair access to data for all, for banks, PSD2 poses substantial challenges, such as an increase in IT costs due to new security requirements and the opening of APIs. However, the main concern is that banks will start to lose access to their customers’ data. Alex Bray, Assistant VP of Consumer Banking at Genpact believes that a possible outcome of Open Banking is that banks could end up surrendering their direct customer relationships. If they don’t acknowledge the need for rapid change or move too slowly to adapt to the landscape, they risk becoming “commoditised payment back-ends as new aggregators or payment initiators swoop in”.
However, Alex Bray also argues that for banks to take advantage of PSD2, “they will need to find a balance between openness, privacy and data protection.” There is also a case to suggest that traditional banks who embrace and utilise the new directive to its potential could transform a potential threat into a huge opportunity. He also suggests that: “they [banks] will need to improve their analytics so they and their customers can make the most of the huge amounts of new data that will become available”. Only a well-thought-out strategy will help banks to survive the disruption to the long-established financial industry – and cooperating with FinTechs can be part of it. Alex Kreger, CEO of UX Design Agency suggests that “Gradually, they [banks] could turn into platform providers of banking service infrastructure… As a result, successful banks may lose in service fees, but they will gain in volume. Many FinTech start-ups will not only offer services on their platform, they will actively introduce innovative products designing new user experiences, thereby enriching the financial user’s journey and transforming the banking industry. This will attract new users and provide them with new ways of using financial instruments.”
Only time will answer all the outstanding questions related to the open-banking revolution. FinTech firms are expected to ultimately benefit from all these changes – however, whether the traditional banks will cohere to the new regulations quickly enough, whilst finding ways to adapt to them, remains to be seen.
By Paresh Davdra, CEO & Co-founder of RationalFX & Xendpay
It was 1961 when Britain flustered into an application for membership of the European Economic Community – an initial step in the direction of something that would, over the years, translate to being a part of the world’s largest single market and by 1973, Britain was officially a part of the EEC.
The blueprint of this vision for the European Union, one that would be intrinsically linked on socio-economic paradigms, existed way before it was officially enacted upon under the treaty of Maastricht in 1993. The main reason for a Union was seen as a preventive measure against the possibility of future rises of nationalism, and along with this came the economic benefits through collaboration between a few of the world’s most productive countries.
In some ways, it feels like Britain’s membership of the European Union has come and gone quickly; what’s passed even quicker is the year since the UK decided to end their relationship with the EU. The implication of this development has affected more lives than one can count and of course has made a significant impact on the business sector of both the UK and the remaining EU 27 countries.
The immediate impact of the referendum was felt in the local currency valuation – in June 2016, the pound witnessed shock market devaluation as investors lost confidence in the UK’s future economic outlook. A total devaluation of 17% was immediately priced into the pound. Since then, a lot has transpired – we have faced the turbulence of the US presidential elections, which in addition to the June vote, appeared to spell an uncertain future of the global economic outlook. This did not change much, as uncertainty at home and uncertainty abroad combined began to affect the global markets, leaving investors riding on speculative waves through the initial months of Brexit and the US Presidential elections.
Then there was the legal challenge to the UK government’s ability to trigger Article 50 without going to Parliament. This entire affair actively shaped the market outlooks through the few months of court hearings and market fluctuations, with numerous ‘remainers’ possibly hoping for a U-turn on Brexit. Of course, this would not be the case in any way, yet the court hearings would see valuations of UK companies and the pound change within the course of mere minutes. Furthermore, organizations throughout the UK raised concerns over uncertainty of access to the single market, especially in light of immigration and passporting rights for employees, an aspect considered crucial by most international organizations that are headquartered in the UK, this story however, is on-going and much clarity is yet to be delivered.
Through the Brexit year, consumers have had to endure the news that Marmite and Nestlé coffee would now be more expensive, in addition to few other FMCG’s. At this point, organisations had already started to price in the beleaguered pound, as market confidence refused to budge. However, there seemed to be some hope for a few sectors of the UK economy; for instance, the export sector enjoyed the priced down costs on the back of the devalued pound – while the manufacturing sector faced the brunt of rising costs due to the same reason.
After the court hearing on triggering Article 50, a vote and a general debate in parliament raised points on mandatory mentions of key issues within the official notification for triggering Article 50. Thus began the process to pen down the divorce bill that marginally touched on issues such as promises of securing rights for EU citizens in the UK. Even though the picture appeared to be one of a panic struck market, in the initial days of 2017, we somehow found ourselves amid a seemingly buoyant economy. As UK organizations amended their overarching business plans, the economic data releases spoke a much sturdy language – bringing back hope to the UK’s future prospects as an independent economy.
On 29th March 2017, the Article 50 notification was presented to president Tusk, officially invoking Article 50 and starting two years of negotiations to establish a deal for the UK’s exit from the Union. In the letter presented to Donald Tusk, the UK acknowledged the ‘four freedoms’, the main doctrines that lie at the heart of the EU and buttress the single market. The UK pointed out that goods, capital, services, and labour are inseparable and emphasized that we are not pursuing association with the single market. Nevertheless, the importance of “economic and security cooperation” was emphasized on along with a stern mention of a “bold and ambitious” Free Trade Agreement that would encompass sectors crucial to the two linked economies such as financial services and network industries.
By now the markets have priced in the uncertainty of Britain’s future relationship with the EU, Prime Minister Theresa May has, on several occasions, announced a new outlook towards the world with a vision for a more ‘open’ Britain. The new outlook has brought to light new aspects of economic ties that Britain is seemingly inclined on exploring, especially the ‘look east’ policy – scouring trade ties with India and the Middle-East, either of which have not yielded concrete results thus far. However, this may not be the main challenge for the UK currently. The ability to maintain a skilled workforce along with seamless cooperation between international associations such as the regulatory authorities and other associations maintaining consistent global standards could be the challenge that we must address for a sustained outlook towards a better future, with or without the EU.
One year on since the referendum, much of the mist still remains. The way forward does appear clamorous with much room for scepticism, but being at the cross roads many times since the June vote has strengthened the ones involved, though it may be difficult to distract ourselves from hard economic truths – the way forward certainly does require hard work in truly looking at an independent and ‘open’ Britain.
The bravery of the UK is deeply reflected in its economic strength and the belief in itself is the key driver for the near future, the markets have righteously shrugged off the shock and scaled themselves to absorb even more. We are not at a time and place where a wait and see policy would flourish.
Tony Butterworth is a Senior UK Immigration Consultant with 23 years’ experience in UK immigration, seven of which were spent in the Home Office as Executive Officer. He works with large multinational companies and individuals of all nationalities, such as skilled migrants, investors and high net worth individuals who are seeking work authorisation for economic based activities. Here he offers his insights into the Brexit implications on immigration in the UK, recent regulatory developments in the sector and what it means to be an immigration practitioner.
As a thought leader in the segment, what would Brexit mean for immigration in the UK? Do you believe that leaving the EU will actually reduce immigration in the country?
Whilst the true impact of Brexit on UK immigration remains to be seen, it will inevitably lead to changes to the current EEA policy. Following the Prime Minister’s speech earlier this month, we know now that the United Kingdom intend to impose restrictions on nationals of EU states wishing to enter the United Kingdom. The question remains as to when and how this will take form.
Currently, there is no legal requirement for EEA nationals or even their family members to register their residence with the Home Office. There could be significant numbers of these migrants living in the United Kingdom with no Home Office record. This issue has been addressed in the recent introduction of The Immigration (European Economic Area) Regulations 2016. What is evident is that the introduction of stricter registration requirements on EEA nationals and their family members is almost a certainty. Another point to bear in mind is that removing free movement of EEA nationals into the United Kingdom does not necessarily mean a reduction of workers entering the United Kingdom. Employers will still be selective as skills and experience are required to fill posts. If these cannot be met by UK workers, they will be forced to continue to look for talent further afield. It is likely that any changes to immigration requirements, as a result of Brexit, will not deter employers from recruiting the best and most skilled workers.
What would you say was the biggest regulatory development to affect the UK Immigration sector over the last 12 months?
The UK Immigration Act 2016, came into force in May 2016. This Act is significant because not only did it introduce changes to Immigration law and policy, but it also covers housing, social welfare and employment. Significant changes include the right to freeze bank accounts and seize driving licences of migrants who are here unlawfully, imposing criminal sanctions on employers found to be recruiting illegal workers, and the right to remove all migrants from the United Kingdom pending their appeal against the decision to remove.
What do you anticipate for the sector in 2017? Are there any legislative changes on the horizon?
Following changes to the Tier 2 category which were implemented in November 2016, further changes are due to be applied in April 2017. This includes the introduction of the ‘Immigration Skills Charge’ under which employers will be required to pay a fee of £1,000 per year for each sponsored migrant, requiring Tier 2 (ICT) Migrants to pay the Immigration Health Surcharge (IHS), increasing the Tier 2 (General) salary threshold to £30,000, and abolishing the Tier 2 (ICT) Short Term category. The Immigration (European Economic Area) Regulations 2016 will also come into effect on 1st February 2017. The main changes in the regulations are the introduction of a ‘genuineness test’ for Surinder Singh cases, the requirement for EEA applications to be completed on prescribed forms, and abolishing the right of appeal for extended family members.
What challenges does your work throw up regularly and how do you structure your approach in order to overcome them?
Immigration practitioners face challenges in keeping abreast of the ever changing and sometimes complex immigration rules and policies; monitoring regulatory developments, analysing their impact on both individuals and businesses, and implementing the necessary changes in the interests of our clients. It is important to actively engage in dialogue with regulators and participate in consultations, where possible. Our aim is to keep our clients informed of changes as soon as these are anticipated and to provide advice on overcoming any obstacles such changes will pose.
What are Ferguson, Snell & Associates’ major achievements?
Apart from ensuring our clients continue to receive the high level of service we have become known for, evidenced by the number of long standing client still with us, Ferguson, Snell & Associates continues our journey with a strong global team. By responding to our clients need for immigration and coordination services into the US, EMEA and emerging markets, we are growing from strength to strength. Our global team brings a new dimension to our business and sets us apart from our close competitors. Coming up with an efficient and strategic global immigration plan is a challenge when immigration is not included in the corporate agenda. But our skills in providing efficient and creative solutions is where we prove ourselves to our clients.
Client referrals and a professional, experienced and talented team is testament to our progress and reputation.
The latest figures from the Lloyds Bank Investor Sentiment Index show a substantial drop in investor confidence, post the results of the EU Referendum. After two consecutive months of improved sentiment, the mood among investors is now at its lowest level since the Index began in March 2013 and has turned negative for the first time.
Perhaps unsurprisingly, investor sentiment is increasingly negative to those asset classes exposed to the UK, with equities and in particular UK property falling sharply into negative territory (declines of 21.75 and 35.36 percentage points respectively). UK gilts also saw sentiment decline steeply, showing a drop of over 15 percentage points.
Sentiment towards cash has also seen a slight fall, and although last week The Monetary Policy Committee voted to leave rates unchanged, there is speculation that the Bank will take some action next month. Inflation expectations in the UK have risen following the fall in the value of sterling, raising the prospect of some price increases, particularly for dollar-based goods.
The continuing flight to safe havens has helped maintain and further the allure of gold, which has seen the greatest positive swing of 16 percentage points. Those assets classes which are typically seen as riskier and less familiar to many investors – commodities, emerging markets and Japanese equities, have also seen sentiment improve as investors look further afield from those asset classes they think may be most impacted by the UK’s split from the EU. Although overall sentiment to Japan remains in negative territory, speculation has also grown that Prime Minister Shinzo Abe is contemplating helicopter money to revive the country with consumption vouchers for lower-income workers to be introduced as a combination of monetary and fiscal policy.
Markus Stadlmann, Chief Investment Officer at Lloyds Private Banking, says:
“We have seen strongly declining sentiment from investors in the aftermath of the Referendum. Initial reactions were clearly very negative to UK assets, although we did see some investors coming back to the table to buy back into UK shares following the initial sell-off.
“We would expect investor sentiment to continue to be susceptible to sharp, short-term shifts as investors absorb the news flow over the next 2-3 months.
“One area where sentiment and market performance have moved in tandem is commercial property, and this is an asset class where we remain extremely vigilant, particularly around issues such as liquidity. Our client portfolios remained resilient over this period, as we had moved away from credit risk and built US positions relative to European exposure.”
Despite the sell-off in the wake of the Referendum, UK equities actually showed positive performance for the month ending on the 1st July. UK gilts rose nearly 5% in this period, whilst UK corporate bonds rose 2.9%. Gold was the strongest performer with a 10% increase, whereas Japanese equity declined 7.5% and UK commercial properly fell by over 10%.
(Source: Lloyds Banking Group)
Fluctuations in the real estate market caused by the UK’s vote to leave the European Union are likely to be shorter-lived and less severe than many investors fear, according to LaSalle Investment Management’s mid-year Investment Strategy Annual (‘ISA’) 2016.
The correction in real estate pricing is expected to be largely restricted to the next 18 months, and medium-term capital inflows into real estate will only be interrupted, not reversed, the ISA finds. It also suggests that, given the ultra-low interest rate and bond yield environment, UK real estate yields are only expected to increase by 40-50 basis points by the end of 2017, even if the country’s political landscape remains unclear. Meanwhile in Continental European, investors will continue to edge up the risk curve as long as the economic recovery continues largely unaffected, but will have one eye on risk contagion from the UK.
Overall, the ISA suggests that some of the fears currently surrounding the real estate market in the country may be overdone. Other findings include:
-The overall impact of Brexit on the Private Rented Sector (PRS) should be limited given the ongoing undersupply.
-Real estate assets with long, index-linked leases are likely to outperform over the next few years.
-The predicted capital market re-pricing will lead to an opportune time to enter the UK market – particularly for US dollar-denominated and Japanese yen-denominated investors.
Elsewhere in Europe, the headwinds facing London’s financial markets should help support the real estate market in cities such as Frankfurt, Paris, Dublin, and to a lesser extent Amsterdam and Madrid. Even before the impact of Brexit, office demand across Europe was undergoing a strong renaissance in cities with strong trends in Demographics, Technology and Urbanisation.
Globally, the ISA says the lower for longer situation actually boosts core real estate returns in the short-run, even as it dampens the long-run outlook for rental income growth. As a result, real estate values for stabilized assets in major markets outside the UK may continue to increase or hold steady, but the cyclical recovery in fundamentals will be moving much more slowly now. At the same time, cross-border and domestic capital sources in many countries could narrow their range of target investments to focus on these traditional, core themes.
Jacques Gordon, Global Head of Research and Strategy at LaSalle, said: “Across the globe, the fundamentals of supply and demand appear to be well-balanced going into the second half of the year in most of LaSalle’s major markets. Furthermore, turmoil in capital markets might also open higher-yielding buying opportunities from distressed sellers as the implications of the Brexit vote in the UK ripple around the world. Although the UK has been the epi-centre for political and financial tremors since June 24th, the law of unintended consequences suggests that investors should also closely watch for ripple effects in the EU, North America and even all the way to Asia-Pacific.”
Mahdi Mokrane, Head of Research and Strategy for Europe at LaSalle, said: “The UK, and in particular a dynamic London, home to one of the world’s most liquid, transparent, and investor-friendly real estate markets, is likely to reinvent itself outside of the EU, and the overall prospects for the UK outside the EU could well be broadly more positive than what is implied by current market commentators.
“We expect the forecast correction in real estate pricing to be largely restricted to 2016-17 and medium-term capital inflows into real estate will only be interrupted rather than reversed”.
(Source: LaSalle)
