Uncertainty surrounding Brexit is blamed for blighting many aspects of our lives. In the corporate sector, companies of all sizes have been putting expansion plans on hold until the way ahead becomes clearer. Understandable perhaps, but the result is that UK economic growth and productivity are both slipping.
Property prices have been falling, too, particularly in London and the South East. People have not yet reached the stage where they are posting the keys back to the bank or building society (as happened in the 1990s when an estimated 1.6m people were in negative equity), but they are not inclined to move house either. House prices are currently at a greater multiple of earnings than at any time since records began; the RICS is expecting the number of transactions to fall by 5% this year and for house prices to stagnate.
On the business property front, flexible workspace operators accounted for roughly one sixth of all new commercial property in London last year, a trend that was mirrored in cities like Birmingham and Manchester. Most significantly, demand has been coming not just from start-ups, which was to be expected, but from an increasing number of multi-nationals who want short-term leases and the flexibility to expand or contract their space and workforce requirements in line with customer demand. As technology enables more and more people to work from home, bespoke or ‘trophy’ properties on long leases are rapidly becoming a thing of the past.
The trap we must not fall into is blaming Brexit for everything that ails us. First of all, economic slowdown is occurring in China, leading to growing concerns about a possible recession in the US; i.e. nothing whatsoever to do with us pulling out of the EU. Closer to home, Germany and France are both performing below expectations. Sure we have problems, but we are not alone and Brexit is only one factor.
Change should be a good thing, but there are always those who prefer the familiarity and certainty of the status quo. For example, the mighty Fidelity International launched 12 new funds last year featuring variable management fees based on investment performance. According to the FT, nine of those funds managed less than £60,000 each at the end of December – five had attracted less than £4,000 each. The explanation for this investor indifference appears to be that, while funds with fixed fees were deemed unfair in falling markets, they were at least understood. By contrast, the new products featured charges that were difficult to explain and understand. Moral of the story: sometimes you just can’t win!
But that should not deter businesses from trying new initiatives in markets that are undergoing radical and permanent change. I am reminded of a famous quote from Winston Churchill: “A pessimist sees difficulty in every opportunity; an optimist sees opportunity in every difficulty.”
