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Brexit weighing on UK housing market outlook – RICS

The outlook for the UK housing market darkened in August as uncertainty about Brexit takes its toll, according to the latest survey from the Royal Institution of Chartered Surveyors.

The net balance of surveyors reporting that house prices have risen over the last three months increased to -4 in August from -9 in July, coming in ahead of expectations for a reading of -10.

However, Brexit-related uncertainty dented the outlook, with the near-term sales expectations net balance falling to -23 from -4, while the near-term prices expectations net balance declined to -24 from -13.

RICS chief economist Simon Rubinsohn said: “It is hard to get away from the shadow being cast over the housing market by the seemingly never-ending Brexit saga. Indeed uncertainty is a theme that respondents continue to highlight as a negative influence on sentiment in survey after survey.”

Capital Economic economist Hansen Lu said: “In all, today’s data support our view that there will be no recovery in transactions or house price growth before the end of the year. We expect that to happen whatever the Brexit outcome, although a no-deal exit could lead to a sharp fall in housing transactions.”

By Michele Maatouk

Source: Sharecast

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Brexit prep has cut productivity of UK business, says Bank of England

The Brexit process has cut the productivity of UK companies by between two and five per cent, research by the Bank of England has found.

Much of this drop since the vote to leave the European Union in 2016 is due to falls in businesses’ productivity as managers dedicate several hours per week to Brexit planning, researchers said.

“But we also find evidence for a smaller negative between-firm effect too as more productive internationally exposed firms have shrunk relative to less productive domestic firms,” they added.

The anticipation of Brexit has also “gradually reduced” investment by 11 per cent since the referendum, with the vote generating “a large, broad and long-lasting increase in uncertainty.”

This fall investment was gradual, taking three years to materialise, researchers said. This slow fall contrasted with predictions that it would “fall sharply” in the year after the referendum “and then recover”.

“This delay suggests firms may not respond as rapidly to large shocks that cause persistent uncertainty rather than short-term uncertainty, possibly because uncertainty leads firms to act cautiously,” the researchers said.

The scale and duration of the uncertainty generated by the decision to leave the EU marked it out as unique, the report said.

“Compared to previous uncertainty shocks Brexit is notable for its persistently high level of uncertainty, which sets it apart from other measures of uncertainty which capture immediate responses to shocks that quickly die away.”

By Anna Menin

Source: City AM

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Worries mount for UK businesses and consumers as Brexit crisis builds – surveys

Confidence drained away from UK businesses and consumers in August as the Brexit crisis deepened, according to surveys that suggested the political ructions were taking an increasing toll on the economy.

The Lloyds Bank Business Barometer slid to 1% from 13% in July, its lowest level since December 2011, when Britain was struggling to recover from the global financial crisis.

Separately, a survey of consumer confidence from market research company GfK was its joint weakest since mid-2013, driven lower by deepening pessimism about the economy.

The signs of a wilting economy – similar to elsewhere in Europe – raise the stakes for Prime Minister Boris Johnson.

If his gambit of suspending parliament to deliver Brexit on Oct. 31 fails, he may have to fight a national election while the world’s fifth-biggest economy falls deeper into malaise.

“(The surveys) do seem to indicate that the rebound in the third quarter that many of us anticipated on the back of a weak second quarter might be somewhat muted,” Peter Dixon said.

Britain’s economy shrank in the second quarter, a hangover from the stockpiling boom in advance of the original March Brexit deadline. Another contraction in the current quarter would officially herald a recession.

“It’s a fairly weakish environment, what with global problems and of course our own domestic issues to worry about,” Dixon added.

Business confidence declined in every region of the United Kingdom, Lloyds said, although the fall was steepest in the manufacturing-heavy East Midlands region of England.

British manufacturers, who account for about 10% of the economy, are facing the possibility of a no-deal Brexit which is likely to hurt their supply chains, plus a slowdown in the global economy.

CONSUMER CONSTERNATION
Separate data added to signs the housing market, which slowed sharply after the 2016 Brexit vote, is stabilising.

British banks approved the greatest number of mortgages in two years during July, the Bank of England said, while mortgage lender Nationwide reported house prices increased at the fastest annual pace in three months.

At -14, the GfK survey was the weakest since January, before which it had been lower only in mid-2013. All the survey’s components, including the outlook for personal finances and the economy, declined in August.

“Until Brexit leaves the front pages – whenever that will be – consumers can be forgiven for feeling nervous not just about the wider economy but also about their financial situation,” Joe Staton, client strategy director at GfK, said.

Another poll of consumers from U.S. bank Citi and pollsters YouGov showed inflation expectations among consumers for year ahead rose to their highest level since 2013.

“The increase could be driven by rising chances of a rupture with the EU on Oct. 31, which could lead to higher consumer prices via tariffs, supply disruptions and weaker sterling,” Citi economists said in a note.

By Andy Bruce

Source: UK Reuters

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Chancellor urged to revisit stamp duty for landlords

The government is being urged to “do more” to ensure the housing market is able to overcome the impact of Brexit.

Online mortgage broker Mortgages.online is calling on the Chancellor to take further steps in his Spending Round to stimulate the market amid Brexit uncertainty, pointing to the buy-to-let market as the one that requires focus.

Stamp duty in particular needed revisiting it stated after a surcharge of 3 per cent was introduced for second homes in April 2016, closely followed by cuts to mortgage interest tax relief for landlords.

Paul Flavin, managing director of mortgages.online, said: “The increased stamp duty payable on buy to let purchases, and the removal of the ability to offset mortgage costs has put many investors off the property market, with a knock on effect of reducing the stock of rental properties.

“We would encourage the Chancellor to look again at the negative impact these measures have.”

He added that Brexit fears had helped create a general lack of confidence and depressed values, exacerbated by valuers being cautious.

Mr Flavin said: “We have two basic messages for the Chancellor. Relief for buy to let investors and measures to stabilise the economy with clarity once and for all on Brexit, are both needed urgently.

“The alternative is for a continuance of a depressed housing market which is healthy neither for the economy nor the government if an election is on the horizon.”

The call comes after research found a record number of landlords are planning to sell rental property in the next 12 months as their profitability has fallen for the third successive quarter.

Meanwhile yesterday (August 28) the government announced measures to make it easier for people to get on the housing ladder with Help to Buy.

Under the changes, which are taking effect immediately, people will be able to take out longer mortgages than the current 25-year terms.

The move reflects change in the wider mortgage market, where the number of first-time buyers taking out a mortgage of more than 30 years has doubled in the last decade.

Housing minister, Esther McVey MP, said: “We are determined to open up the dream of home ownership to the next generation and our Help to Buy schemes have already been used more than 500,000 times by families to get a leg up onto the property ladder.

“I want our Help to Buy scheme to work for homeowners so we are giving people the freedom and flexibility to take out longer mortgages, if it suits their needs.”

Mr Flavin said: “The extension to 35 years will help many borrowers as their monthly payments will reduce but the Chancellor will need to do more in the Autumn Statement on 4 September if the housing market is to overcome its Brexit blues.”

The government also announced reforms to shared ownership rules that allow homeowners to increase their share at increments of 1 per cent rather than the current 10 per cent.

Mark Hayward, chief executive of NAEA Propertymark, said: “We support thinking creatively about ways to help first time buyers on to the housing ladder and consumers will welcome the opportunity to increase their share of ownership more easily and to simplify the process by which they can sell their homes.

“Government must be careful of the unintended consequences that any changes to Help to Buy could have on the rest of the market as in many cases these are not properties that feed into the general market place but into a ‘cul de sac’ with no assistance to upward activity”.

The Treasury has been approached for comment.

By Jennifer Turton

Source: FT Adviser

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UK business pessimistic about economy

The consensus from UK boards is that the combined effects of Brexit, trade wars and consumer slowdown is going to have a negative effect on the UK economy over the next 12 months

More than two-thirds (69%) of respondents from FTSE 350 companies believe that the UK economy will deteriorate in the next year, according to a recent Boardroom Bellweather survey from the Chartered Governance Institute (ICSA) and the Financial Times.

Only 7% expected improvement – a slight uptick in confidence since the end of 2018 when only 2% expected improvements and 81% expected a decline – however still less than pre-referendum, when 24% expected a decline and 13% an improvement.

“The continuing uncertainty about what a post-Brexit Britain might look like, muddled even further at the time of the survey by the Conservative Party leadership contest and differing views with regard to a no-deal Brexit, has undoubtedly contributed to the pessimism that people are feeling,” said Peter Swabey, director of policy and research at ICSA.

Meanwhile, the research found that 40% of respondents thought a no-deal Brexit would be damaging to business, while 40% thought it would not and 20% were unsure.

More generally, 3% of respondents believe leaving is positive, compared to 59% who see it as damaging – down from 73% at the end of 2018 – while the number predicting no change has increased from 28% to 38% since the end of last year.

Swabey suggested that more companies enacting contingency plans might explain why nearly half (49%) of respondents see Brexit as a principal risk and why only 29% have increased inventory in preparation for a no-deal.

However, he noted that the proportion of those considering Brexit as a principal risk has increased since summer 2018 – up from 39%.

“With companies unsure of what trade and non-trade barriers might be in place come the end of the year, it seems evident that they are acting with a certain amount of caution,” Swabey said.

Meanwhile, 51% of respondents expected a decline in global conditions over the next 12 months, while 10% predicted an improvement and 23% thought conditions would stay the same.

“With trade war between the US and China still playing out, over twice as many people now fear a decline [in global economic conditions] than was the case in summer 2018, when just 24% predicted a decline,” Swabey said.

Business optimism in both business and professional services sectors plummeted in the three months to August from -8% to -31%.

The decrease almost matched the decline seen at the start of 2019, according to the Confederation of British Industry (CBI).

Although business volumes stabilised in Q3, businesses expect a decline over the following three months, with respondents pointing to overseas business as a limiting factor.

“UK services firms are operating in a tough environment: activity is sluggish and profits are expected to fall in the coming months. It’s little wonder that business sentiment has plummeted again,” said Rain Newton-Smith, chief economist at CBI.

She described outlook for services companies as “bleak”, pointing to Brexit uncertainty as a dampener on investment and expansion.

“The idea of a no-deal Brexit is clearly weighing down the economy and is affecting businesses both big and small. So the economy can get back on track, the government must re-double its efforts in securing a deal,” she said.

By Danny McCance

Source: Economia

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Boardroom survey finds fears over UK economy

A majority of business boardrooms are predicting a downturn in the UK economy over the coming year, as Brexit uncertainty and trade war troubles take a toll on corporate confidence.

Almost 70 per cent of respondents from FTSE 350 companies believe that the UK economy will decline in the next 12 months, improving from 81 per cent at the end of 2018 but still remaining significantly below the spring reading in 2016 before Britain voted to leave the EU.

Forecasts about the outlook for companies’ own industries have rallied slightly with 43 per cent predicting a decline, down from 50 per cent last winter, according to the findings from the ‘Boardroom Bellwether’ survey published by The Chartered Governance Institute in association with the FT.

Publicly-listed companies in the UK are on the fence about the effect of no-deal Brexit, today’s report found, with 40 per cent believing it would be damaging, 40 per cent believing it would not and 20 per cent unsure.

“The continuing uncertainty about what a post-Brexit Britain might look like, muddled even further at the time of the survey by the Conservative party leadership contest and differing views with regard to a no-deal Brexit, has undoubtedly contributed to the pessimism that people are feeling,” said Peter Swabey, policy and research director at The Chartered Governance Institute.

Meanwhile, the perception of the UK government as business-friendly has fallen from 29 per cent in summer 2018 to 15 per cent this summer, while the number of respondents viewing the government as not business-friendly has risen sharply from 13 per cent in winter 2018 to 42 per cent.

Despite this, the opposition has not benefited with 81 per cent of respondents viewing Labour as not business-friendly and not one respondent considering that it is, the lowest result since winter 2015 when two per cent believed them to be business-friendly.

“The survey was carried out before Boris Johnson was chosen as the Conservative leader, but it does seem that the business-bashing of recent times has taken its toll. The government must remember that business plays a key part in creating wealth and employment,” said Swabey.

By Sebastian McCarthy

Source: City AM

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UK economy on course to stagnate in third quarter, says Bank of England governor

Bank of England governor Mark Carney has said that the UK’s economy is on course to stagnate in the third quarter.

He also said that underlying growth looked muted even with Brexit volatility stripped out.

Carney said Britain’s economy was “currently close to equilibrium, operating just below potential” in a speech at the Jackson Hole gathering of global central bankers.

The economy shrank in the second quarter for the first time since the global financial crisis a decade ago, due in part to companies preparing for the original Brexit deadline of end of March.

Earlier this month, the Bank of England forecast 0.3 per cent growth for the current quarter, but August business surveys have painted a bleaker image.

“The UK economy contracted slightly last quarter and surveys point to stagnation in this one,” Carney said. “Looking through Brexit-related volatility, it is likely that underlying growth is positive but muted.”

Despite this, the job market is still going strong with the fastest wage growth in 11 years and unemployment at near record-lows.

Meanwhile, Carney also said that weak business investment was an obvious result of Brexit uncertainty in the lead up to the 31 October leave date.

“There is overwhelming evidence that this is a direct result of uncertainties over the UK’s future trading relationship with the EU, and it serves as a warning to others of the potential impact of persistent trade tensions on global business confidence and activity,” Carney said.

The governor reiterated that the Bank of England may have to ease monetary policy to help the economy in the event of a no-deal Brexit, but added that there were limits to how much it could tolerate a rise in inflation caused by a falling pound.

Carney maintained that a no-deal Brexit was “not a given” despite its increased likeliness just two months out.

By Michael Searles

Source: City AM

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Scottish housing market hits 11-year high despite Brexit fears

SCOTLAND’S property market has soared to an 11-year high despite ongoing fears surrounding Brexit, new research indicates.

Property transactions worth more than £8 billion were recorded between January and June this year, the best for a six-month period since 2008, according to Aberdein Considine’s quarterly property monitor.

High sales in the second quarter, from April to June, have been credited with driving the trend.

A total of 25,806 sales concluded in these three months, up by almost1000 (4%) on the same period last year. The additional activity pushed the average price of a Scottish home up by 1.6% to £172,189, despite the market stalling elsewhere in the UK.

Jacqueline Law, managing partner at Aberdein Considine, said buyers have retained a “degree of confidence” amid political uncertainty.

“Buying a house is not something people do with tomorrow or next year in mind,” she said.

“It’s a considered decision which most purchasers take with a medium to long-term view – and these figures suggest people are looking beyond the current political and economic headwinds with a degree of confidence.”

Edinburgh remains the most expensive place to buy a home in Scotland, with the average cost being recorded at £264,943.

The capital is followed by East Lothian, where prices have risen by 15.2% to £260,399 – the largest increase in Scotland. East Dunbartonshire came in third at £250,017, up by 4.1%, with East Renfrewshire in fourth place with an average price of £244,902 – a 3.9% drop.

East Ayrshire recorded the lowest average price at £117,676, a 3.3% decrease, while the largest percentage decrease was in South Ayrshire, which fell by 8.4% to £146,984.

Law added: “The regions with the highest property prices – Edinburgh, East Lothian and Glasgow’s more affluent suburbs – have a common tie, which is a lack of homes for sale. Average sale prices in these areas are reflective of the high demand for what limited stock is coming to market.

“Regardless of what kind of deal – if any – the UK leaves the EU with on October 31st, many Scots are pressing ahead with purchase decisions in order to provide short to medium-term security.

“However, in many areas, there are simply not enough homes on the market to meet that demand, which in turn is driving up prices for the ones which do.

“We’ve seen a similar pattern in cities like Stirling and Perth over recent quarters, where prices are edging towards the £200,000-mark despite sales falling.”

By Tom Jarvis

Source: The National

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‘Summer buying spree’ in the housing market ahead of Brexit

The looming Brexit deadline is spurring some home buyers into action, according to a website.

The average asking price on a home across Britain still fell by 1% or £3,192 month-on-month in August, Rightmove said, adding this was a better performance than usual for the summer holidays.

The average price tag now stands at £305,500.

The number of sales being agreed is the strongest for this time of year since 2015 and are 6.1% higher than a year ago, according to the index.

The North East of England, the East of England and Yorkshire and the Humber are leading the way with sales over 10% higher than a year earlier, Rightmove said.

Miles Shipside, Rightmove director said: “Surprisingly there seems to be a bit of a summer buying spree, despite it normally being a quieter time of year.

“For some reason more buyers have cottoned on to the fact that it can be a good time of year to buy, with less competition from other buyers, and sellers typically more willing to accept a lower price.”

He continued: “While the end of October Brexit outcome remains uncertain, more buyers are now going for the certainty of doing a deal, with some having perhaps hesitated earlier in the year.”

By Vicky Shaw

Source: Yahoo Finance UK

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UK wage growth hits 11-year high despite shrinking economy

Britons’ wages grew faster than at any time since the financial crisis in the three months to June, official figures showed today, despite the UK economy shrinking over the same period.

Meanwhile, the number of UK workers without a job rose slightly in the three months to June, although it stayed close to record lows, the Office for National Statistics (ONS) said.

The figures are the latest sign that the UK jobs market remains robust despite an economy stalling under the weight of Brexit and a global slowdown. Official figures last week showed British GDP shrank by 0.2 per cent in the second quarter of the year.

Wage growth reached an annual rate of 3.9 per cent in the second quarter of the year, higher than the 3.6 per cent growth in May. It also beat economists’ expectations of a 3.8 per cent rise.

The rise means real wages – with inflation taken into account – climbed at an annual rate 1.9 per cent in the second quarter excluding bonuses.

Yet unemployment rose slightly to 3.9 per cent of the working age population between April and June, figures from the Office for National Statistics (ONS) showed.

The score was above the 3.8 per cent seen in May and above predictions of the same figure again. It was lower than the four per cent unemployment rate of a year earlier, however.

Work and pensions secretary Amber Rudd said: “Households across the UK are earning a regular income, and millions more receiving a pay boost thanks to wages rising at their fastest in a decade – outstripping inflation for a 17th month in a row.”

“Our workforce increasingly reflects our vibrant society, with a record number of women in employment while the number out of work falls to an all-time low.”

She said young people were “entering a workforce that is flourishing and full of opportunity”.

ONS deputy head of labour market statistics Matt Hughes said that although “employment continues to increase” the “number of vacancies has been falling for six months, with fewer now than there were this time last year”.

“Excluding bonuses, real wages are growing at their fastest in nearly four years, but pay levels still have not returned to their pre-downturn peak.”

The ONS said average regular pay before tax and other deductions was estimated at £469 per week in real terms in June 2019. This was lower than the pre-recession peak of £473 per week.

Tom Stevenson, investment director for personal investing at Fidelity International, said: “The UK’s labour market is still the bright spot in the British economy.”

“Many households will feel they are enjoying a more comfortable standard of living at the moment. More people are in work than at any time since 1971.”

Tej Parikh, chief economist at the Institute of Directors, said the rise in unemployment shows the jobs market “may now be reaching its peak”.

“With investment in machinery and technology often deemed too risky right now, businesses have sought to bring on board more staff to help lift output,” he said. But this has meant “firms have found it harder to fill their openings”.

PwC chief economist John Hawksworth said that “productivity growth remains very weak”, with output per hour down by 0.6 per cent in the second quarter of 2019 compared to a year earlier.

“Weak productivity growth reflects subdued corporate investment growth over the past three years as businesses wait for greater clarity on Brexit.”

By Harry Robertson

Source: City AM