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50% of UK firms believe Brexit will Boost business

51% of UK businesses believe geopolitical tensions, including Brexit, will have a positive effect on their business in 2020, according to new research released today by trade finance provider Stenn.

The study, which spoke to 250 senior executives at medium-large sized businesses in the UK conducted prior to the December general election, revealed that despite the prolonged uncertainty, businesses remain upbeat with 29% believing this positive effect will be ‘significant’.

While it’s unlikely a UK-EU trade deal will be in place until the end of the year, 56% of firms believe their company’s import business will grow in 2020, on average by 9%.

Similarly, in terms of exporting services, 57% of UK firms believe revenue will grow this year, on average by 11%.

Breaking this down, 15% of firms believe their export business will grow 11-15% in revenue, and 11% expect a growth of between 21 and 25%.

“The UK is on the cusp of leaving the EU and as we edge closer to the January 31st exit date the country is in an unprecedented stage,” says Dr. Kerstin Braun, President of Stenn Group. “As 2019 was marked by business uncertainty, 2020 will be the year that companies forge ahead with new growth strategies.

Looking across industries, growth for imports and exports is felt highest across financial and professional services.

The study showed 29% of firms in this sector believe their import of services will grow up to 25% in revenue this year, and a further 20% believe it will grow 26-50%.

“The general election provided businesses with much needed clarity surrounding Brexit and it’s wholly encouraging that even prior to the result, businesses have been feeling positive about the impact it will have. Businesses have been given the assurance they need to plan ahead to a post-Brexit era,” says Braun.

When looking at exports, 30% of financial and professional services firms also believe their export business will grow up to 25% in revenue, and 27% predict it will grow 26-50%.

In the manufacturing industry, 41% of senior executives believe their import business will grow up to 25% this year, and 32% believe their export business will also grow between 1-25%.

By comparison, just 12% of wholesalers predict the same high growth of between 26-50% in their import business, and 15% expect equal growth in export. Wholesalers are divided on whether their export business will grow or shrink between 1-25% this year (both 27%).

“While a Brexit trade deal probably won’t be agreed until the end of the year, businesses largely remain confident that both their import and export business activity will grow in 2020,” says Braun. “We know UK firms are looking to non-EU markets.

According to government data, as of October, exports to non-EU countries were growing twice as fast than those to the bloc, largely driven in part by the US and China, with total trade with the USA surpassing £200 billion for the first time.

The UK’s non-EU export business grew by 4.2% in October, in comparison to a rise of 1.6% to EU member countries.

“Some of this rebound will be the result of the expected upswing in global trade, but we can strongly say that UK companies are ready to get back to business,” says Braun.

Source: Pound Sterling Live

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House price growth picking up after sluggish 2019

Annual house price growth jumped to 1.9% in January 2020, up from 1.4% in December 2019, Nationwide’s House Price Index has revealed.

House prices jumped up by 0.5% on a monthly basis – further signs that the housing market is finally bouncing back from a sluggish 2019.

Between November 2018 and 2019 yearly house growth was below 1%.

Robert Gardner, Nationwide’s chief economist, said: “Recent data continue to paint a mixed picture. Economic growth appeared to grind to a halt as 2019 drew to a close, though business surveys point to a pickup at the start of the New Year.

“Labour market data was surprisingly upbeat in the three months to November, with the economy adding over 200,000 jobs – the largest gain since the end of 2018.

“The underlying pace of housing market activity has remained broadly stable, with the number of mortgages approved for house purchase continuing within the fairly narrow range prevailing over the past two years.

“Healthy labour market conditions and low borrowing costs appear to be offsetting the drag from the uncertain economic outlook.”

He went on to say that the economy is likely to expand at a modest pace in 2020, with house prices remaining fairly flat over the next 12 months.

Jonathan Hopper, managing director of UK property finder Garrington Property Finders, was especially upbeat.

He said: “Two months in and there’s no sign yet of the Boris bounce falling back to earth.

“With annual price growth now standing at double the rate it was at for 11 out of 12 months in 2019, things already look and feel very different on the front line of the property market.

“January is usually a busy time for estate agents as would-be buyers begin their search in earnest. But this year their numbers have been swelled by thousands of people who sat on their hands as Brexit uncertainty swirled.

“Sellers too are returning to the fold, meaning the market is seeing a simultaneous uplift in both demand and supply. Only when the dust settles will we know for certain how that double stimulus affects prices.”

But Josef Wasinski, co-founder of Wayhome said: “Although this rise may be welcomed by those looking to sell their home, it does nothing to ease the frustrations of those reluctant renters hoping to buy their first home.

“For many, there is little choice but to remain part of ‘generation rent’ amid an increasing struggle to raise the typical standard 10% deposit in order to get on the ladder.

“The truth is that we need real innovation in the property market to level the playing field and help those hardworking, credit-worthy people who want to own their own home. The government needs to remember its manifesto promises and provide support to those aiming to make the next step.”

BY RYAN BEMBRIDGE

Source: Property Wire

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Mortgage approvals jump to four-year high in December

Mortgage approvals surged in December to a four-year high, data published on Monday showed.

According to UK Finance, the banking lobby group, house purchase mortgage approvals by the main high street lenders rose to 46,815 in December from 44,058 in November, the highest number since August 2015. Analysts had been expecting the figures to remain largely flat, at around 44,000.

Gross mortgage lending across the residential market was £22.2bn in December, bringing the total for 2019 to £265.8bn, 1.1% lower than 2018’s figure. A total of 982,286 mortgages were approved, a 7.4% increase on the previous year.

Howard Archer, chief economic advisor to the EY ITEM Club, said mortgage approvals would have been “significantly lifted by increased confidence and reduced uncertainties” following December’s general election.

He continued: “Prior to November, mortgage approvals for house purchases had fallen back for three successive months to be at a seven-month in October, indicating that activity was being pressurised by heightened uncertainties over the domestic political situation and Brexit.

“Housing market activity, and possibly to a lesser extent prices, could be given a modest lift in 2020 if the government introduces specific measures aimed at boosting the sector in the Budget. Furthermore, mortgage interest rates are at historically low levels; indeed there is clearly a real possibility that the Bank of England could cut interest rates in 2020.

“However, the economy still looks set for a pretty challenging 2020, so the upside for house prices is likely to be limited. Furthermore, Brexit concerns could very well pick up again as 2020 progresses, due to concerns over what will happen at the at the end of the year if the UK and European Union have failed to reach agreement on their long-term relationship.”

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: “The jump in mortgage approvals in December likely solely reflects the stimulus provided by the sharp fall in mortgage rates in the second half of last year; the additional boost to approvals from the result of the general election is still to come. All the evidence so far points to a further rise in demand after the election. The new buyer enquiries balance of the RICS Residential Market Survey leaped in December to its highest level since January 2019.”

UK Finance also said that credit card spending rose 7.3% year-on-year to £11.8bn in December, with repayments continuing to offset spending, meaning the overall level of borrowing through cards grew at a slower rate of 2.4% annually.

Personal borrowing through loans was 14% higher year-on-year, while overdraft borrowing eased 0.8%.

Previously the British Bankers Association, UK Finance represents more than 250 firms.

By Abigail Townsend

Source: ShareCast

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Interest rates: what a base interest rate cut would mean for mortgage borrowers

Thinking of taking out a mortgage or remortgaging in 2020? With interest rates remaining at record-level lows, what would a potential further interest rate cut spell for homeowners, apart from the promise of ever-lower fixed-rate mortgage deals?

While an interest rate cut is by no means a guarantee, there is a growing assumption that the base rate will be cut further from the current 0.75 per cent on the 31 January. Does that mean that mortgage interest rates will follow suit and fall even more? Yes; however, there’s more to the consequences of this decision that simply lower mortgage rates.

The current low mortgage interest rates are not just down to the low base rate; or rather the low base rate has set off a chain reaction in which lenders are under pressure to offer ever-lower mortgage rates in a bid to secure a dwindling pool of eligible mortgage applicants.

Current mortgage approval rates lag well behind pre-2008 levels, with fewer first-time buyers coming onto the market every year. The fact is that the current crop of potential first-time homeowners simply doesn’t have the large deposits required for the hugely expensive UK properties (the price of property still sits at over seven times the average UK salary). Add to that unusual income patterns, with a growing number of people in self employment, and it is easy to see that the traditional ideal mortgage applicant lenders have favoured are becoming an increasing rarity.

The fact remains that mortgage lenders cannot afford to lose the custom of those people who can afford a mortgage, but some will find themselves in a situation where they struggle to compete for those applicants. A base rate cut will mean that the UK’s top lenders (the big banks) will either slash interest rates on their top mortgage products, or introduce new mortgage packages with attractive perks, such as cashback, or a combination of both. The reason they can do this is because they have the profit margins to accommodate making concessions to the base rate cut.

This won’t be feasible for small to medium-sized lenders, however, who simply can’t survive on rock-bottom-rate mortgage products. The only avenue for those lenders to keep a sustainable profit margin is by loosening at least some of their lending criteria, or developing more specialist products catering to people with specific circumstances, e.g. self employment, retirement, or buy to let. Those three areas in particular are likely to see an increase of tailored products with better LTVs (loan-to-interest ratios), or more options for repayment strategies on interest-only mortgages.

This is not to say that we will see anything like the loose approach to mortgage lending criteria seen prior to the financial crisis of 2008; the 100 per cent mortgage, for one, is unlikely to make a return. Apart from everything else, all changes will still need to comply with FCA (Financial Conduct Authority) lending regulations. What we are are likely to see in 2020, however, is lenders looking for ways to attract mortgage applicants who are solid, but whose financial profile would previously have categorised their application as non-straightforward.

BY ANNA COTTRELL

Source: Real Homes

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New build starts fall in 2019

The number of new build starts fell by 7% to 157,550 in the year to September 2019, signalling that the government is failing to meet its housebuilding targets.

On a more positive note completions rose by 9% to 177,980 – however that is still well short of the government’s aim to deliver 300,000 homes a year.

Clive Docwra, managing director of leading construction consulting and design agency McBains, said: “The government has set a target of delivering a million homes in the next five years, yet today’s figures show that the construction industry is way off meeting those rates on current trends.

“Annual new build starts in the year to September 2019 saw a decrease of 7% on the previous year, and while completions totalled close to 178,000, we need to be building more than 200,000 homes each year to meet the government’s ambitions.

“Last month’s Queen’s Speech contained lots of detail on demand-side measures – such as first-time buyers being offered a discount on purchases – but nothing on the supply side.

“The government needs to set out how it intends to boost housebuilding and increase the supply of new homes needed to tackle the housing crisis, such as freeing up more land to build and cutting red tape on planning.”

New build dwelling starts in England were estimated at 39,510 in Q4 2019, a 2% increase compared to the previous three months and an 11% increase on a year earlier.

Completions were estimated at 46,000, a 2% increase from the previous quarter and 11% higher than a year ago.

BY RYAN BEMBRIDGE

Source: Property Wire

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Property market ‘up a gear’ as UK mortgages hit 10-year high

UK banks have approved the highest number of mortgages in 10 years, according to the latest data from industry group UK Finance on Monday.

Figures show 982,286 mortgages were approved by high street banks in 2019, 7.4% more compared with 2018, and amounting to total lending of £265.8bn ($203bn).

2019 also marked the highest annual total for mortgage approvals since 2009 — when 986,742 home loans were handed out — suggesting the property market is primed for ascendancy.

UK Finance said more than half a million (507,789) mortgages in 2019 were for house purchases, the highest annual level since 2015.

Seasonally adjusted figures also show that 46,815 loans for house purchases were approved in December — the highest monthly total since August 2015.

Howard Archer, chief economic adviser at forecasters EY ITEM Club, said: “December’s jump in mortgage approvals adds to a growing amount of firmer data and survey evidence suggesting that the housing market could well be changing up a gear.”

Last week estate agent Rightmove’s house price index showed UK property prices rising at the fastest monthly rate in 18 years. The index recorded its biggest ever monthly leap in asking prices, which came in at £306,810 in January, about £6,785 higher than a month earlier.

Archer also said that while the housing market may get a further near-term boost from reduced uncertainties, EY remained relatively cautious over housing market prospects for 2020 and suspects that the upside will likely be limited.

“Nevertheless, we have modestly raised our forecast for house price gains over 2020 to 2.8% from 2.0%, and there is a possibility that they could rise more than this. This partly reflects the fact that we have also modestly raised our UK GDP growth forecast for 2020 to 1.2% from 1.0%.

“Housing market activity — and possibly to a lesser extent prices — could be given a modest lift in 2020 if the government introduces specific measures aimed at boosting the sector in the Budget on 11 March,” Archer said.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: “The jump in mortgage approvals in December likely solely reflects the stimulus provided by the sharp fall in mortgage rates in the second half of last year. The additional boost to approvals from the result of the general election still is to come.”

He said all the evidence so far points “to a further rise in demand after the election; the new buyer enquiries balance of the RICS Residential Market Survey leaped in December to its highest level since January 2019.”

Mark Harris, chief executive of mortgage broker SPF Private Clients, said: “2019 turned out to be a strong year for the mortgage market, even with disruptive headwinds caused by Brexit and a general election. Lenders remained keen to lend and offered the rock-bottom mortgage deals to prove it.

“With transactional levels low, many lenders didn’t do as much lending as they would have liked, which means there is plenty of cash left in the pot for this year.”

In November, data from the Office for National Statistics showed Britain’s construction industry had rebounded at the fastest pace in a year for the month. Output leapt by 1.9% in a month to £13.8bn, the biggest monthly jump since January 2018. The ONS data pointed to a £135m surge in the value of private housebuilding projects to more than £3bn of work in November.

Ben Johnston, director of Houso, the off-market property app, said: “The market is moving in the right direction… but more emphasis is also needed on the government sorting out stamp duty in the budget so that it is at a more acceptable level to encourage downsizers and second steppers into the move which has been paused for the best bit of five years.”

Jeremy Leaf, a north London estate agent and a former RICS residential chairman, said: “The extent of any post-election ‘bounce’ will probably be determined not only by an ability to match buyer and seller expectations but early clarification of the UK’s future trading relationship with the EU.”

By Sajid Shaikh

Source: Yahoo Finance UK

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Scottish commercial property investment exceeds £2 billion in ‘uncertain’ 2019

Investment in Scottish commercial property remained resilient despite a dip in volumes amid political and macro-economic challenges, according to new analysis from Knight Frank.

The independent real estate consultancy found that £2.074 billion worth of deals concluded in 2019. This was 10.38% below the five-year average after a quiet final quarter, when the UK went to the polls for the General Election.

Edinburgh offices was the stand-out asset class in 2019, increasing by 70.42% on the year before – from £284 million to £484m. By June 2019, investment levels in Edinburgh offices had outperformed the whole of last year on the back of a series of major transactions, including the Leonardo Innovation Hub at Crewe Toll and 4-8 St Andrew Square.

Overseas investors continued to be the main drivers of investment in Scotland last year, with a 56% share of spend on commercial property. Meanwhile, UK institutions’ share of investment has dropped to just 14%.

The well-publicised challenges faced by the high street were reflected in property investment levels in 2019. Transactions for shop units were 79.57% below the five-year average at just £44m (compared to £215.4m), while shopping centres represented £38m of investment in 2019 against an average of £197.6m (-80.77%).

However, Knight Frank said that following the General Election there had been a raft of interest in the Scottish commercial property market and, with a number of buildings being lined up for a sale, the year ahead looked very positive.

Alasdair Steele, head of Scotland commercial at Knight Frank, said: “There were a lot of factors for investors to contend with in 2019 – Brexit negotiations, a change of Prime Minister, and a General Election to name but a few.

“That inevitably leads to a pause for thought, as we have seen with any significant macro-economic or political changes in the past. Against that backdrop, investment levels were robust last year and there were some significant bright spots, such as Edinburgh offices.

“The proportion of buyers from overseas is at historic highs, with more than half of investment coming from international sources and the majority of deals being concluded off-market. Korean funds were particularly active last year – concluding three major deals in Edinburgh and Glasgow – while Middle Eastern interest has also been strong.

“We are already seeing signs that 2020 could be a great year. Investors are coming back to the market now that there is some much-needed political stability. We have had interest come in from a range of international sources, including some buyers who would be new to the Scottish market.

“Inevitably there will be some bumps in the road ahead as Brexit begins to take shape; but, for now, there is a real window of opportunity emerging and we expect trading volumes to pick up in the first half of 2020, all things being equal.”

Source: Scottish Construction Now

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Sterling dips ahead of central bank rate decision; long bets trimmed

The British pound edged lower on Monday as markets await this week’s Bank of England decision on interest rates, which many analysts see as too close to call.

While weak economic data and dovish comments from BoE policymakers have fuelled speculation that the central bank could cut rates at its Jan. 30 policy meeting, though upbeat economic numbers in recent days have cast doubt over that view.

For instance, Friday’s early readings of the IHS Markit/CIPS UK Purchasing Managers’ Index (PMI) showed that Britain’s vast services sector returned to growth in January for the first time since August while manufacturing woes receded.

In subdued Monday trading, sterling dipped 0.1% to $1.3056, sliding below a more than two-week high touched briefly on Friday at $1.3180.

Against the euro, sterling hovered around 84.41 pence, broadly steady on the day.

“This (BoE) meeting follows a run of fairly weak economic data over the last few weeks but with last week’s strong employment data and better than expected flash PMIs confusing the picture,” said Deutsche Bank strategist Jim Reid.

“Our economists have expected a cut for a good couple of months now, but markets are closer to 50:50.”

Analysts noted that market positioning data released on Friday by the U.S. Commodity Futures Trading Commission suggests that, though speculators have slightly reduced net longs in sterling, they maintain an overall long position.

But market watchers believe the drop in positioning is not reflective of changing interest rate expectations. Market expectations of a rate cut dropped to 59% on Monday, compared with more than 70% a week earlier.

“Last week’s relatively marginal correction in positioning has done little to dent the view that speculative investors remain broadly sceptical about the possibility of a cut,” ING strategists said in a note.

Those bets on further gains in the British currency could be vulnerable as Thursday’s BoE meeting draws nearer, putting downward pressure on the pound, they said.

Elsewhere, the BBC reported Irish Prime Minister Leo Varadkar as saying the European Union will have the upper hand in post-Brexit trade talks with Britain and questioned Prime Minister Boris Johnson’s timetable for a deal to be truck by the end of the year.

Britain will formally leave the European Union on Friday.

Reporting by Dhara Ranasinghe

Source: UK Reuters

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Buy to let mortgage rates are falling: could you be a landlord in 2020?

Buy to let mortgage rates are lower now than in autumn 2019, with the downward trend in rates for fixed-rate deals set to continue into 2020. This is increasingly likely, given the strong possibility of a further base interest rate cut by the Bank of England.

Those looking to take out their first buy-to-let mortgage and existing landlords looking to remortgage will find themselves in an auspicious environment this year, as lenders compete for business for a reduced number of applicants. The very best rates for buy-to-let mortgages are currently to be had within the two-year and five-year fixed rate deals with at least a 50-per-cent LTV (loan-to-value) ratio, but rates are falling across the board.

The absolute best buy-to-let mortgage deal is available from The Mortgage Works who are offering an incredibly low rate of just 1.74 per cent on 75 LTV purchases, as well as £250 cashback. Landlords looking to make improvements to their buy-to-let properties in order to make the new mandatory energy efficiency standards will no doubt welcome this extra cash. Under new EPC rules, a property has to have an energy efficiency rating of at least an ‘E’ to be considered suitable for renting.

So, is taking out a buy-to-let mortgage still a good idea in 2020? Absolutely, and as the number of people renting is only going to increase, buy-to-let is always going to be a worthwhile investment. And while the old tax relief rules are being phased out this year, the changes will have a significant effect only on those in higher tax brackets (40–45 per cent), with those letting out one or two properties unlikely to see any significant changes to their outgoings. The new rules have been introduced to try and curb the amount of tax relief claimed by the highest-earning landlords (think people with huge property portfolios). Any changes in the amount of tax paid by regular landlords should be offset by remortgaging to a lower fixed rate.

BY ANNA COTTRELL

Source: Real Homes

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UK braced for weak growth and further interest rate cuts in 2020

Consensus forecasts show UK economic growth of around 1.1% in 2020, down from 1.3% last year, with Britain likely to remain trapped in a low interest rate environment post-Brexit, according to Dr John Ashcroft.

Consensus forecasts show UK economic growth of around 1.1% in 2020, down from 1.3% last year, leaving Britain likely to remain trapped in a low interest rate environment post-Brexit, according to Dr John Ashcroft, author of The Saturday Economist.

‘Further talk of one interest rate cut in the UK and further cuts in the US as growth slows (possibly below 2% this year) suggest long rates will remain under pressure,’ Ashcroft said.

‘We remain trapped on Planet ZIRP [Zero interest-rate policy].’

UK Chancellor reassures firms about ‘no alignment’ with EU rules post-Brexit

Business leaders were eager for clarification after the UK Chancellor Sajid Javid said that there would be ‘no alignment’ with EU regulations in a post-Brexit trade deal with the EU last week.

‘Manufacturers like common standards on products and components in many markets,’ Ashcroft wrote in a blog post. ‘Common standards guarantee quality, generate lower unit costs, economies of scale and improve productivity.’

‘The Chancellor claimed the Treasury would not lend support to manufacturers favouring EU rules,’ he added. ‘That just does not make sense.’

However, the Chancellor has since toned down his rhetoric, which initially shocked British industry, with Javid clarifying that divergence from EU rules will only occur if it is in the UK’s economic interest.

FTSE 100 bogged down by uncertainty

The blue-chip index has had a mixed start to the new year, with it climbing more than 130 points in the first half of January, only to see those early gains eroded, with it tumbling a little over 2% this week.

The FTSE remains bogged by uncertainty on economic growth and the direction of sterling, according to Ashcroft.

A clear direction on Brexit with a planned exit at the end of the January this year saw the pound bounce to test the $1.34 level only to fall back to $1.31.

‘A test and proof of the $1.30 level may now continue for some time,’ Ashcroft added.

The FTSE 100 is trading at 7628 as of 10:15 (GMT) on Friday.

By Aaran Fronda

Source: IG