Since the June referendum there has been much speculation and hypothesis, but no-one is any the wiser as to how our economy and the commercial property sector will fare following Brexit. The latest twist in the tale is a ruling by the High Court that the Government has no legal right to trigger Article 50, setting course for exit from the European Union, without the approval of Parliament. The outcome of the Government’s appeal to the Supreme Court will not be known until January 2017. However the general consensus is that, even if the High Court’s decision is upheld, Parliament will not prevent Article 50 from being invoked, though it might demand concessions during negotiations with the EU.
The effect of this is likely to be further delay and more uncertainty.
Impact on the Commercial Property Industry
Some businesses are delaying decisions to develop, invest in or take leases of commercial property. Certain areas of the country have functioned in a marketing bubble and prices have largely been unaffected. However there is no shortage of retail premises available, which could give tenants the upper hand in negotiating terms with landlords. The Valuation Office Agency’s review of business rates to take effect from 1 April 2017 could have as much an impact on business decisions as Brexit.
Developers hope that, with encouragement to increase the housing stock, the Government will take the opportunity to offer initiatives for affordable housing, overcome the problem of increased costs of imported raw materials and review somewhat punitive taxes on property. In the meantime, there are signs that national housebuilders are holding back from new land acquisitions until the effect of Bexit is clearer, particularly as regards the future of the City of London as an ongoing financial centre.
The fact that the Bank of England Governor, Mark Carney, has decided to stay for one year after 2019, when Britain is due to leave the European Union, is widely seen as a stabilising factor for the economy.
However if there is a sharp drop in the economy in 2017, inflation could rise, putting pressure on interest rates. Any reluctance of mainstream commercial lenders could increase the opportunities for secondary lenders and peer to peer lending or crowd funding which has been on the rise in recent years.
The Government has pledged to maintain the level of subsidies to farmers until 2020. Beyond that it has the chance to review the complex subsidy system and remunerate farmers for land management e.g. for providing land for floodplains and environmental schemes as well food production. Farmers who rely on seasonal workers are watching carefully to know how Brexit will affect the free movement of people and immigration.
As food imports are likely to be more expensive in the short term, the food and beverage sector could help farmers by sourcing locally produced food. Provided there is better protection for farmers securing fairer deals with supermarkets, this could have a positive effect on farm incomes.
This may be the best time to review land agreements, contracts and any leases that are coming up for renewal to achieve a degree of flexibility. The general consensus in the industry seems to be that we must make the most of opportunities which may arise.
If you would like to further dicuss any of the information detailed above, please contact Consultant, Sue Lister, from our Agriculture & Rural Affairs department on 01892 701394 or at firstname.lastname@example.org.