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Bank of England could cut interest rates if Brexit uncertainty persists, says MPC member

The Bank of England may need to cut interest rates even if a no-deal Brexit is avoided, according to a member of the monetary policy committee (MPC), which sets the rates.

Michael Saunders has said that the Bank may have to cut rates if the “slow puncture” effect on the economy from Brexit uncertainty persists.

It comes just a week after an MPC meeting in which there was no indication that borrowing costs could be cut.

“The economy could follow very different paths depending on Brexit developments,” Saunders said at a business event in Barnsley.

“But in my view, even assuming that the UK avoids a no-deal Brexit, persistently high Brexit uncertainties seem likely to continue to depress UK growth below potential for some time, especially if global growth remains disappointing.

“In such a scenario – not a no-deal Brexit, but persistently high uncertainty – it probably will be appropriate to maintain an expansionary monetary policy stance and perhaps to loosen further.

“Of course, the monetary policy response to Brexit developments will also take into account other factors including, in particular, changes in the exchange rate and fiscal policy.”

Following his remarks, the sterling has fallen by 0.3 per cent against the dollar to 1.229, although it has recovered slightly from its initial dip to 1.227.

Saunders said that Brexit had meant uncertainty for around 50 per cent of businesses and that while it had only had a modest effect on UK growth in 2017 and 2018, this year there was evidence of weaker growth.

The rate-setter also acknowledged that the appropriate policy response to a no-deal Brexit could go up or down, dependent on how supply, demand and exchange rates are affected.

Similarly, if the UK avoids a no-deal Brexit, he said: “Monetary policy also could go either way and I think it is quite plausible that the next move in Bank rate would be down rather than up.

“One scenario is that Brexit uncertainty falls significantly and global growth recovers a bit. In this case, some further monetary tightening is likely to be needed over time.

“Another scenario, and this is perhaps more likely to me, is of prolonged high Brexit uncertainty,” he said.

Saunders concluded that: “In steering through these uncertainties, the MPC will of course be guided by our remit and the aim of ensuring a sustainable return of inflation to the 2 per cent target in a way that supports output and jobs.”

Bank barking up wrong tree

Chief analyst at, Neil Wilson, says the comments show the Bank are “barking up the wrong tree”.

“In making the case for a cut now it conforms to the belief in many in the market that the Bank is barking up the wrong tree with its slight tightening bias in its forward guidance,” he said.

“The comments from Saunders are clearly an added weight on the pound.”

By Michael Searles

Source: City AM

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Unchanged interest rates amid Brexit uncertainty, predicts EY

Despite recent expectation that the Bank of England could either raise or even cut the UK interest rates, EY’s economic analysts have predicted the will likely remain the same.

As recently as June, the focus on UK monetary policy has been when the Bank of England is most likely to raise interest rates.

A turnaround in sentiment, however, has led some to believe the Bank of England could be just as likely to cut them.

According to EY’s ITEM (Independent Treasury Economic Model) Club, it would be a surprise for the Monetary Policy Committee (MPC) meeting to result in anything other than a unanimous 9-0 vote in favour of keeping UK interest rates at 0.75%.

Howard Archer, chief economic advisor to the EY ITEM Club, said: “We expect the Bank of England to keep interest rates unchanged at 0.75% on Thursday following a unanimous 9-0 vote of the Monetary Policy Committee (MPC) at their August meeting. This would match the outcome of the MPC’s last meeting in mid-June.

“However, a fair amount has changed since the last MPC meeting in mid-June and this will lead to a lot of interest in the tone of the minutes of the August meeting as well as in the new growth and inflation forecasts contained in the simultaneously released Quarterly Inflation Report.”

The direction interest rates move hinges on Brexit developments. Should the UK leave the EU with a deal in place, the EY team expects that the current rate of 0.75% will remain the same well into 2020, and gradually rise in-line with a slowly growing economy.

The expectation is that the Bank of England will acknowledge the recent increased risk facing the UK economy due to uncertainty surrounding Brexit, but are unlikely to react by cutting interest rates unless there is a damaging ‘no-deal’ Brexit in October.

“Increased belief that the Bank of England’s next move will be to cut interest rates rather than increase them is the consequence of a number of factors,” said Archer. “These include the weakened performance of the UK economy in the second quarter, domestic political uncertainties, a slower and more uncertain global economic environment which is expected to see the Federal Reserve and ECB shortly cut interest rates, and Brexit uncertainty.”

“If the UK ultimately leaves the EU without a “deal”, the Bank of England has repeatedly held to the view that interest rates could move in either direction.”

The view mirrors Bank of England Governor Mark Carney’s comments saying that the prospect of a no-deal is slowing down economic growth, and that the BoE would likely be required to provide stimulus to the economy should a no-deal occur.

Speaking to MPs, Governor Cerny said: “It’s more likely we would provide some stimulus. We have said we would do what we could in the event of a no-deal scenario but there is no guarantee on that.”

“There is not a business investment boom going on in the country right now. I think we all know why that is not the case.”

The fear of further Brexit uncertainty is also reflected in economic predictions. The likelihood is that further delay in leaving the EU could also lead to a cut to interest rates, or at the very least a long delay before any hike.

Archer said: “If Brexit is delayed again – most likely until the end of March 2020 – we expect the Bank of England to hold off from hiking interest rates until further into next year as it gauges how the economy is performing after the UK’s exit from the EU.”

By Chris Jewers

Source: Accountancy Age

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UK house sales plummet in June, held back by Brexit ‘ball and chain’

House sales crashed 16.5 per cent in June, as the property market took a “wait-and-see” attitude to transactions amid Brexit uncertainty.

Monthly HM Revenue and Customs (HMRC) figures showed British residential property sales fell to 84,490, more than one-sixth down on the same period last year.

The figure represents a 9.6 per cent monthly drop between May and June this year.

Analysts were quick to point out the figures are reported with several months’ lag, meaning the transactions relayed are those accepted in March.

Benham and Reeves director Marc von Grundherr said: “With many of us, perhaps foolishly, believing we would be exiting the EU at the end of March, it stands to reason that the vast majority of buyers may have refrained from a sale until this event had passed.

“Therefore any dip in transactions should be viewed as a momentary stutter and with many other market indicators suggesting a return to form and growing levels of buyer demand over the last few months, we should start to see the number of properties being sold climb from here on in.”

Non-residential transactions were also down 7.2 per cent month-on-month.

‘A fragile market landscape’
Springbok Properties founder Shepherd Ncube added: “A lull in transactions will come as a cause for concern in what is currently a rather fragile market landscape, however, the broader picture simply doesn’t suggest a market that is on its knees.

“Homebuyer appetite is alive and well and while many may not want to fill up on bread until the main course of Brexit is finally served, we are on course to see a healthy level of properties transact this year regardless.

Joseph Daniels, founder of modular developer Project Etopia, added: “Sales volumes have walked off a cliff, crashing hard as the Brexit deadlock becomes the ball and chain fixing the housing market to the spot.

“What you’re seeing is a wait-and-see attitude among sellers and many buyers becoming endemic.”

By Alex Daniel

Source: City AM

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UK house price growth slows in May amid Brexit uncertainty

Annual growth of UK house prices remained below one per cent for the sixth consecutive month in May, as political uncertainty continued to weigh on the property market.

Prices fell 0.2 per cent month-on month, while annual house price growth slowed to 0.6 per cent, falling from 0.9 per cent in April and below the consensus of 1.2 per cent, according to Nationwide.

That left the average UK house price in May at £214,946.

Brexit caution weighs on UK housing market

“Nationwide’s data confirm that house prices remain on an essentially flat trend, primarily because Brexit uncertainty has instilled some caution among buyers,” said Samuel Tombs, chief UK economist at Pantheon Macroeconomics.

He added: “The trend likely won’t improve in the next couple of months, given the political deadlock in Westminster.”

The data underlines fears of a persistent slowdown in activity in parts of the UK’s residential market amid uncertainty over Brexit, with industry experts noting in recent months that many buyers and sellers have adopted a “wait and see” approach until the political deadlock comes to an end.

However, following the avoidance of a no-deal Brexit on 29 March, a number of studies have signalled a recent uptick in consumer confidence, with UK Finance finding mortgage approvals at a 26-month high last month.

But Howard Archer, chief economic adviser to the EY Item Club, warned any boost from avoiding Brexit would be “limited”.”With Brexit being delayed until 31 October – and it currently very unclear what will happen then – and the domestic UK political situation volatile, prolonged uncertainty will weigh down on the economy and hamper the housing market,” he said.

And he predicted UK house prices will only rise one per cent over 2019.

First-time buyer numbers start to recover

Nationwide also said today that first-time buyer numbers have continued a steady recovery in recent quarters, apart from in London, where “a period of rapid house price growth…means that monthly mortgage payments would also be unaffordable for a large proportion of the local population”.

The research found that the process of saving up for a deposit was one of the key barriers for many potential buyers.According to today’s study, it takes roughly 15 years for someone earning the typical wage in London to save for a 20 per cent deposit on their first home. Robert Gardner, Nationwide’s chief economist, said: “Survey data suggests that new buyer enquiries and consumer confidence have remained subdued in recent months.

“Nevertheless, indicators of housing market activity, such as the number of property transactions and the number of mortgages approved for house purchase, have remained broadly stable.”

He added that those buyers will continue to be put off by the current economic uncertainty, despite high employment and wage growth.

“While healthy labour market conditions and low borrowing costs will provide underlying support, uncertainty is likely to continue to act as a drag on sentiment and activity, with price growth and transaction levels remaining close to current levels over the coming months,” he said.

Volatile UK housing market reflects Brexit divisions

Jeremy Leaf, north London estate agent and a former RICS residential chairman, said: “Once again, we see no real pattern for the housing market emerging – one month prices, transactions or mortgage approvals are up, then down or very little movement, the next.

The good news for us at the sharp end is that there is no major correction being seen or expected for the time being at least, despite some predictions to the contrary.”However, the recent EU parliamentary elections demonstrate the country is still massively divided about Brexit just as the property market is split about how to remove the uncertainty it has created.”

By Sebastian McCarthy

Source: City AM

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Scottish housing market hits 11-year-high despite Brexit uncertainty

Scottish property sales have risen to their highest level in 11 years as buyers brush aside fears over Brexit.

New figures from Aberdein Considine’s Property Monitor report show that homes collectively worth £3.4 billion changed hands during January, February and March this year – the highest since the credit crunch hit the global economy in 2008.

Sales for the quarter are up £80 million (2.3 per cent) on last year and £225m (seven per cent) on 2016, the year the British electorate voted to leave the European Union.

With negotiations stalling and parliament gridlocked, economists had expected the property market to slow across the UK.

However, 19,491 Scottish homes were sold in the first quarter of 2019, up 2.8 per cent year-on-year thanks to significant sale growth in Aberdeen, Aberdeenshire and East Lothian.

The average cost of a property in Scotland is also 8.6 per cent higher compared with the same period in 2016, with prices now at £166,334, albeit price growth has slowed to just 0.2 per cent year-on-year.

Aberdein Considine managing partner Jacqueline Law said the report, published today, showed that Scots were “getting on with their lives” amid the political uncertainty.

“It had been feared that Brexit may bring the property market to a halt. However, quite the opposite has turned out to be true so far with the value of property changing hands returning to near-record levels.

“In fact, the only time that first quarter sales have been higher was in the years leading up to the global financial crisis.

“Businesses and consumers across Scotland can’t escape the uncertainty which Brexit is creating, but what is clear is that people are getting on with their lives whilst the politicians try and resolve the situation, which we hope will be sooner rather than later.”

Despite the sales growth, the report does show a sudden halt to the house-price growth in Scotland’s biggest cities.

Edinburgh, which was enjoying its best period of property price growth since before the recession, has recorded falling prices so far this year. However, with an average sale price of £258,822, the capital remains the most expensive place to buy a home in Scotland.

Glasgow, like the capital, was also benefiting from a strong period of house-price growth – but has seen prices fall 1.7 per cent so far in 2019 to £152,079.

Average prices continue to fall in Aberdeen and Aberdeenshire, Scotland’s other major market. But after years of decline caused by the oil and gas downturn, confidence is returning. Sales in Aberdeen alone are up by nearly 13 per cent year-on-year.

So far this year, it has been more provincial areas which have grown to boost the national market.

East Lothian recorded a substantial 38 per cent rise in the value of properties sold, reaching £109,039,078, which is a year-on-year increase of £30million.

Neighbouring West Lothian also demonstrated why a significant number of new housing developments are planned for the region with the number of homes sold up almost 12 per cent, and the value of property changing hands rising 19 per cent to £111,392,371.

The cultural and economic renaissance which is currently taking place in Tayside has also continued to have a direct effect on housing, particularly in Dundee. The city followed up a nine per cent rise in the value of properties sold in the final quarter of 2018, with a further 16 per cent jump in the first months of 2019. Average prices also rose 10 per cent at £134,845.

Source: Scottish Legal

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Brexit uncertainty fails to slow Scottish housing market

THE Scottish housing market has hit an 11-year high for sales after a surge in transactions in the north-east and East Lothian, according to new figures.

Aberdein Considine’s Property Monitor report shows homes collectively worth £3.4 billion changed hands during January, February and March this year – the highest since the credit crunch hit the global economy in 2008.

Sales for the quarter are up £80 million (2.3%) on last year and £225m (7%) on 2016.

A total of 19,491 homes in Scotland were sold in the first quarter of 2019, up 2.8% year-on-year due to significant growth in Aberdeen, Aberdeenshire and East Lothian.

With the UK’s negotiations with the EU stalling, Parliament gridlocked and a change of prime minister in the offing, economists had expected the property market to slow across the UK.

Managing partner Jacqueline Law said the report, published today, showed that Scots were “getting on with their lives” amid the political uncertainty.

“It had been feared that Brexit may bring the property market to a halt,” she said. “However, quite the opposite has turned out to be true so far with the value of property changing hands returning to near-record levels.

“In fact, the only time that first-quarter sales have been higher was in the years leading up to the global financial crisis.

“Businesses and consumers across Scotland can’t escape the uncertainty which Brexit is creating, but what is clear is that people are getting on with their lives whilst the politicians try and resolve the situation, which we hope will be sooner rather than later.”

The average cost of a property in Scotland is 8.6% higher compared with the same period in 2016, with prices now at £166,334.

Despite the sales surge, the report does show a sudden halt to the house-price growth in the country’s biggest cities.

Edinburgh, which has had its best period of property price growth since before the recession, has recorded falling prices so far this year.

The capital remains the most expensive place to buy a home in Scotland, with an average sale price of £258,822.

Prices have fallen 1.7% in Glasgow so far in 2019 to an average of £152,079.

Average prices continue to fall in Aberdeen and Aberdeenshire, Scotland’s other major market.

But after years of decline caused by the oil and gas downturn, confidence is returning, with sales in Aberdeen alone up by nearly 13% year-on-year, and sale values in Aberdeen up 11.6%.

Other notable area include Shetland – which has seen a 13% rise in sale values and a 15% rise in sale numbers – and West Lothian, which has seen a 19% rise in sales value.

For the first time, the Property Monitor report also include research on levels of personal debt in Scotland.

Increased borrowing can be an indicator of households being stretched. However, all but one of Scotland’s 16 postcode regions have managed to cut the amount owed to lenders through personal loans.

Unsecured loan debt across the country is down 8.3% year-on-year, with Aberdeen and Aberdeenshire leading the way.

Overall, debt levels in Scotland are falling at twice the UK average.

Source: The National

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Not all gloom for rental market

It has been widely reported in the media how Brexit uncertainty has slowed down both the buy-to-let and residential housing market.

However, closer examination suggests other factors may have as much or more influence on current market activity.

Undeniably there has been a slowdown in both residential and buy-to-let markets over the past 12 months.

UK Finance recently reported that while buy-to-let remortgage activity has soared, the total number of buy-to-let purchase completions in 2018 was 11.2 per cent less than in 2017.

Meanwhile, their figures for January 2019 showed a 1.5 per cent reduction in the volume of residential lending, compared to the start of 2018. Put simply, people were choosing to sit tight and rely on the private rental sector rather than buy their own homes.

Key Points

  • There has been a slowdown in the buy-to-let sector
  • There has been intervention by the government in the buy-to-let market
  • The number of buy-to-let products shows lenders are positive about the outlook

For many who are renting, the prospect of saving for a deposit remains an almighty challenge.

The Ministry of Housing, Communities and Local Government’s recently-released English Housing Survey for 2017-18, indicated that the private rental sector has remained unchanged for the past five years at 4.5m households, which equates to 19 per cent of the total.

The latest survey revealed that 58 per cent of renters expected to buy a property eventually, with 26 per cent anticipating this will happen within the next two years, while 41 per cent suggested it will take five years or more to accomplish this goal.

Those timescales suggest that Brexit is not a major consideration.

Meanwhile, landlords have been dealing with more immediate and tangible concerns.

The past three years have seen substantial government intervention in the buy-to-let market, with the introduction of stamp duty on additional properties and the reduction and gradual replacement of mortgage interest tax relief perhaps the biggest financial changes.

But factor in the new house in multiple occupation licensing laws and crackdowns on living standards, plus the imponderable consequences of the imminent tenant fees ban and it is easy to see why some landlords have decided to sell up or not invest.

In particular, it has been the smaller landlord, perhaps with less time to keep abreast of the changes or adapt their strategy, that has struggled with the changes.

Many landlords with larger portfolios may already operate with more organised strategies in place, particularly in light of the Prudential Regulation Authority changes that came into effect in October 2017.

These required a more rigorous approach to the underwriting of portfolio borrowing and resulted in such investors having to provide more detail at the application stage.

It is too simplistic to simply lay current property investment levels purely at the feet of Brexit. There are too many other elements at play.

Adopting a pragmatic approach to investment

There are still plenty of reasons why buy-to-let investments can offer opportunities to those looking for solid financial returns.

Firstly, depending largely on property location and type, many landlords continue to turn a profit, which currently outweighs those available from other types of investment.

Here are a few positive factors to consider if your clients are contemplating a buy-to-let investment:

• At the moment, there is a general sense of stagnation within the property market. This means that property prices are, in many areas, no longer accelerating at previous rates.

Consequently, there may be opportunities available on the market. If you come across a property that has historically been rented out, this might mean there is less work to do upon purchase to have it ready to let.

• Market sentiment, as highlighted by the government’s survey, suggests no reduction in demand for rental homes, as thousands put on hold their dreams of home ownership in favour of renting for the foreseeable future.

In February, London estate agent Foxtons reported that in 2018 there was an 8 per cent increase in renter registrations in London, compared to 2017.

• There are big regional disparities in buy-to-let performance – and landlords are not bound geographically by where they own property. Buy-to-let yields and capital growth prospects vary across the UK, with the North West and the Midlands figuring prominently in recent data.

Since June 2016, when the Brexit vote took place, 10 UK cities have achieved double-digit house price growth, with seven located in the north of England.

• While Brexit has arguably had a negative effect on London and the South East, so too has the price of property for would-be buyers and, likewise, rent for would-be tenants.

With government investment in infrastructure, in particular the Northern Powerhouse, businesses have relocated to other parts of the UK and workers have followed suit. That has helped to create vibrant micro-economies for buy-to-let.

• Historically, house prices have recovered from any short-term economic or political unrest and proved resilient in the face of the financial crisis of a decade ago. Investment in bricks and mortar should always be regarded as a long-term strategy, in this context, well beyond Brexit.

• The sheer volume of buy-to-let products in the market place (1,162 in late February 2019, according to Moneyfacts), reflects a positive buy-to-let outlook from lenders. But the choice also comes with all sorts of incentives and competitive mortgage rates.

The Bank of England base rate remains historically low and rates for five-year fixed rate buy-to-let mortgages, for example, are more than 2 per cent less than in 2010.

The big question is how long lenders can sustain these low mortgage rates? By delaying investment in buy-to-let, some borrowers could run the risk of missing out on the lowest deals, should rates rise in the future.

We live in extraordinary times and Brexit presents its own unique set of challenges, but should not be confused with wider property market issues.

Perhaps never before has there been as much need for a buoyant private rental sector that serves the country’s escalating needs.

With low interest rates, infrastructure investment and growing tenant demand, Brexit may not present as big a challenge as recent tax and legislative changes. But, with a sound and responsive investment plan in place, buy-to-let landlords can prosper and Brexit offers no reason why that should not continue.

By Andrew Turner, interim chief executive of Commercial Trust

Source: FT Adviser

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UK labour market remains strong in face of Brexit uncertainty

Levels of employment in Britain increased 179,000 to a record high in the three months to February, official data confirmed on Tuesday, but economists see ongoing headwinds for households and businesses.

The ILO unemployment rate remained at 3.9% in February, the Office for National Statistics said, with an estimated 32.7m people in some form of paid employment, keeping the employment rate at 76.1% of all people between 16 and 64 years of age.

Excluding bonuses, wages grew 3.4% compared to a year earlier, driven higher as firms in several sectors find it harder to attract and retain staff. Weekly earnings excluding the effect of inflation were up 1.5%, ONS said. Total pay including bonuses stayed steady at 3.5%, while normal pay growth for January was revised up to 3.5%.

By another measure that is watched by members of the Bank of England’s monetary policy committee, wage growth excluding-bonuses on a three-month annualised basis fell below 2% for the first time in almost two years.

Employment numbers, the unemployment rate and wage growth were all pretty much as economists expected.

More timely data from March revealed that the number of unemployment claimants had risen by a larger than expected 28,200, with the claimant count rising to 3.0% from 2.9% in February.


ONS deputy head of labour market statistics Matt Hughes said: “The jobs market remains robust, with the number of people in work continuing to grow. The increase over the past year is all coming from full-timers, both employees and the self-employed.”

While employment growth was solid, economist Thomas Pugh at Capital Economics, suspect that this “could mark the peak of employment growth as the Brexit uncertainty reached its crescendo”, for now, seeing the surveys turning down sharply in March.

At the same time, annual regular pay growth in the three months to February ticked down to 3.4% from 3.5%, but total pay (including bonuses) stayed steady at 3.5%, and the unemployment rate remained at 3.9%, the lowest since 1975.

He noted that the annual rate of employment growth slipped to 1.4% from 1.5%, suggesting that with employment growing more slowly than the 2.0% output growth in February, that productivity growth should have picked up. “This could ease some of the recent upward pressure on unit labour costs and give the MPC more confidence to hold off raising rates until Brexit has been resolved,” he said. “Indeed, we do not expect the Bank to resume raising rates until the second half of next year.”


Although earnings have now been growing ahead of inflation for over a year now, in real terms, Hughes noted that wage levels have not yet returned to their pre-downturn peak.

Wage data is indeed only half the story, with inflation data on Wednesday due to confirm the degree to which pay is rising ahead of costs. Consumer price inflation printed at 1.8% at the last reading.

Ed Monk, an associate director at Fidelity International, said the decade of lost wage growth means “it may be a while before households feel like they’re getting any richer”.

Monk added: “The state of the UK economy now kind of depends whether you’re a half full or half empty sort of person. Looking on the bright side, it’s a comfort that the pressure on households is easing. On the other hand we know that growth is under pressure and a fall in foreign investment since the Brexit is storing up problems for the future.

“The Bank of England appears unlikely to tightening interest rates in this environment. That helps UK stock market investors in two ways – it gives consumers and companies a hand with lower borrowing costs and it makes returns on risk-free assets like cash less attractive.”

With Brexit uncertainty set to persist, even though it is contributing to the skill shortages that are continuing to boost pay growth, economist James Smith at ING agreed that it is unlikely to be followed up with a BoE rate hike later this year.

Looking at the robust wage growth he saw few reasons to expect this trend to fade imminently, although amid all of the uncertainty, he observed that the number of people on the unemployed claimant count has begun to exceed the number of job vacancies, which was “perhaps a sign of some weakness ahead”.

Smith does not expect a substantial rebound in economic growth over the next few months, with business still facing headwinds including staff shortages, slower global growth and Brexit uncertainty.

He was another who felt it a MPC rate rise was “pretty unlikely” this year – “unless some form of deal is approved earlier than most people expect”, with further gradual tightening impossibly to rule out in the medium term if wages growth rises higher.

By Oliver Haill

Source: ShareCast

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The effect of uncertainty on UK business over the past two years

Brexit is the great big British nightmare of the past two years that we can’t seem to be able to wake up from. The ongoing nightmare has been an endless question mark for the entire world. What is more terrifying is that fact that even in the end game of Brexit, when we are still unsure what the British are planning on. They just asked for another extension and the parliament is stubbornly saying a resounding “No” to everything. This climate has had a strong effect on the world, but most of all, it has had an interesting effect on the startups and new business of England.

The big and old are in no hurry to leave

It seems that the biggest companies, financial or otherwise, are in no hurry to get out of Britain. Over the past few years, barely any of the office jobs associated with the big financial companies have moved to the EU. While the companies are still keeping an eye out for the jobs, it seems that they are hoping for something. After all, the outlook on Brexit has been more and more leaning towards people believing it might not happen at all. The latestpredictions made by the bigger players in the financial fields only shows that more and more companies are expecting a more favorable outcome for the business.

So there is no surprise when we find out that the companies are in no hurry to move to the EU. Some of them are taking their chances, hoping that the people and the parliament might change their mind about what is best for Britain. So this leaves them being comfortable where they are, not risking any of the capital they have dedicated to moving, thinking it might be a gamble. This might be good, for now, but there are dangers associated with this. The biggest danger being how much harder and more expensive it will be for these companies to move, once Brexit does happen. In the worst case scenario, it might take them a long time to deal with the fall out of not taking the prudent step and prepping new offices in the EU.

Unfortunately, big companies are not the ones who decide whether Brexit is happening or not. It is the parliament. The sentiment among the smaller scale businesses and potential business owners is that there is a possibility that Brexit might actually happen.

The rate of new business, slowing down

The sentiment is reflected in the simple fact that there are fewer new businesses being founded in the UK then there was last year. The trend over the past few years has been that of growth. More and more startups and new businesses have been founded in the optimistic context of Britain as it has been up to now. Even in 2017, a year after Brexit, the rate of new companies that were being founded was growing. The optimism of the people and the momentum of those who wanted to found new businesses seemed unstoppable at the time. The government took this as a vote of confidence from their people.

Though now, it seems the lack of confidence is finally having the effect that it should have had initially. The number of new businesses being founded in the UK fell, even if by a small amount, for the first time in years. The people who would be founding companies are instead choosing to go the safer route of finding employment with a private company. There are no specific studies currently, but this is an attitude that goes hand in hand with a lack of faith in the future of the economy. The people are saving the money they would be spending on new business because they are expecting to be needing these savings in order to survive in the short and mid-term.

Employment in the private sector has grown, as a result. Some may even believe this to be a positive sign, as the spending of the private sector increases. But this is positive only as so far as the ability of the people to save goes. The people being employed are the people who, in a more optimistic setting, would be spending their resources on starting new projects and businesses, and this is harmful to the economy. The simplest way to think about this is this – private investment has fallen in the UK over 2018. The rate of the fall has also been the most dramatic since the 2003 recession.

This goes to show: while big companies might be paying more money to their employees, there is less money going around in investing in private business. So, even if people are working and companies continue to hire, the country is spending less and it is getting less of a benefit out of its highly educated, highly skilled human capital. The problem lies with the fact that people don’t know what is going to happen. There has been little to no framework created over the past two years, and now, as the deadline approaches and the parliament is having trouble deciding what to do, the people have lost faith.

Lack of faith, lack of business

A safe economy is what leads to investment, especially risky investment. When a society is more or less confident of the future of its county, it is more likely to take risks. Creating a startup and founding a business usually, entail huge risks. There is the risk of losing all of the money you invest in building the startup, and the risk of never getting the clients you need to run the startup. There is the risk of being unable to find employees, as they consider startups to be less safe options in an unfavorable economy. And Britain looks more confused right now than it ever has before.

What is the result? All of this is going to cost the UK economy a lot of money. As large businesses refuse to prepare for the move and new businesses stall in creation, the economy is slowing down. If the no deal Brexit does happen it will be catastrophic for the country. The idea is simple – the day large businesses start letting people go, there will be no space for employment to shift, so the rate of unemployment will rise, dramatically. Savings will have to be dipped int and spending will decrease. Without new businesses to high skills workers, the unemployment rate will not recover for a while. In the end, Britain ends up with a highly skilled, unemployed workforce that is having trouble emigrating simply because Brexit has imposed restrictions on their travel. While some might call this speculation, there are indications that business has slowed down over the past year and that some of the worst predictions might be coming true. Let’s hope not.

Source: Finextra

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Brexit uncertainty creates opportunities for holiday-let landlords

Brexit uncertainty could create opportunities for UK landlords in the holiday lets sector as fewer Brits vacation abroad, a lender claims.

Andrew Turner, of specialist lender Commercial Trust, says “possible Brexit scenarios” could mean many people have less money to travel abroad and choose to holiday closer to home.

At the same time, if it becomes more laborious and possibly costs more to travel to Europe after Brexit, this too could have an impact on holiday destinations,” he said.

The upshot is that landlords who use their rental homes as holiday lets, could potentially do very well out of Brexit, as a result of growing demand.

Furnished Holiday Lets are viewed as businesses by HM Revenue & Customs and consequently, the tax treatment is different to traditional buy-to-let income.

FHLs have not been damaged by recent changes to buy to let mortgage interest tax relief, meaning an FHL landlord can currently still claim 100 per cent of the interest paid on their mortgage.

Turner says income from FHLs may be invested into a pension, where it may benefit from tax relief under present law.

Landlords of FHLs are also able to claim capital allowances on wear and tear and furniture replacement, whilst also having the ability to claim capital gains tax relief as a business.

Net yields on FHLs can also be competitive, compared to returns on buy-to-let investments. In June 2018, property fund Second Estates indicated that FHLs had an average net yield of 6.1 per cent, compared with 5 per cent for residential buy-to-lets. It stated that the average weekly income on a holiday let was £563, whilst it was £161 for a typical buy-to-let.

Some lenders will also allow the landlord to live in the property, for a restricted proportion of each year, which is something not permitted with buy-to-let.

Turner says that lenders will expect landlords who borrow to fund the purchase of a new FHL to have a separate income and will often set a minimum amount, which has to be proven. Lenders will also expect a prospective FHL landlord to have prior landlord experience.

The property must be furnished and commercially let, with the objective of making a profit and in addition to legal requirements, lenders will set a minimum number of days each year when the property must be available for letting – and typically they will also set a minimum number of days per year that it is let out for.

Source: Simple Landlords Insurance