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Further Brexit delay would hit UK economy – BoE’s Broadbent

Britain’s economy risks damage if Brexit is delayed beyond its latest Oct. 31 deadline because companies would continue to hold back on investment, Bank of England deputy governor Ben Broadbent was quoted as saying on Monday.

“It’s pretty clear that investment has been feeling the consequences of the uncertainty about Brexit and particularly the possibility of a bad outcome,” Broadbent told the Press Association news agency.

“If you continually expect news to arrive imminently – a resolution – then that can have quite a depressing effect on investment,” he said.

By contrast, a Brexit deal would lead to “quite a strong bounce-back in investment.”

Broadbent reiterated the BoE’s guidance that future interest rate increases would be limited and gradual, adding the “emphasis is on the ‘gradual’ bit of limited and gradual.”

He said he did know whether the British central bank would need to increase rates or cut them in the event of a no-deal Brexit shock to the economy.

“I don’t know. I really don’t, because I don’t know how much the exchange rate will move,” he said.

Several other top BoE officials, including Governor Mark Carney, have said a rate cut would probably be needed to help the economy weather the shock of leaving the European Union with no deal.

On whether he will put his name forward as a candidate to succeed Mark Carney as BoE governor, Broadbent said: It’s a big job…I have lots of things to think about before I make that decision.”

Writing by William Schomberg; Editing by Peter Graff

Source: UK Reuters

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UK economy to lose 3.5 percent of GDP in no-deal Brexit – IMF

Britain will suffer economic damage equivalent to the loss of at least 2-3 years of normal growth between now and the end of 2021 if it leaves the European Union without an exit deal, the International Monetary Fund warned on Tuesday.

The world’s fifth-biggest economy could quit the EU as soon as Friday, disrupting its ties with the bloc that it joined 46 years ago, if Prime Minister Theresa May cannot agree a delay with EU leaders on Wednesday.

The IMF said that even in a relatively orderly no-deal Brexit scenario — with no delays at borders and minimal financial market turmoil — the economy would grow 3.5 percent less by the end of 2021 than it would under a smoother Brexit.

“The increase in trade barriers has an immediate negative impact on UK foreign and domestic demand,” the IMF said.

The EU economy would suffer too but by much less than Britain, facing an estimated 0.5 percent hit to gross domestic product compared with a smooth Brexit scenario, the IMF said.

British exports to the EU and other countries which have trade deals with the bloc would face new tariffs and regulatory barriers if Britain reverted to the World Trade Organisation rules favoured by some Brexit supporters.

Supporters of an abrupt Brexit have accused the IMF of making politically motivated forecasts in the past.

In its report on Tuesday, the fund said a worse-case no-deal Brexit scenario involving border delays and financial market turmoil would increase the damage to about 4 percent of GDP by 2021.

The forecasts took into account the British government’s plans not to impose tariffs on most categories of imports in the event of a no-deal Brexit, and also assumed that the Bank of England would cut interest rates.

BoE Governor Mark Carney gave broadly similar estimates of the cost of a no-deal Brexit last month, when he said preparations by government and businesses could mitigate only some of the damage of a no-deal Brexit.

A spokesman for Britain’s finance ministry said the government wanted to leave the EU with a deal but was getting ready for a possible no-deal Brexit.

The IMF downgraded its forecast for economic growth in Britain this year to 1.2 percent from a forecast of 1.5 percent it made three months ago, which would be the weakest since 2009.

Growth for 2020 was seen picking up to 1.4 percent, but in both years Britain’s economy was predicted to grow less than the euro zone, in contrast to before the 2016 Brexit referendum.

“The downward revisions … reflect the negative effect of prolonged uncertainty about the Brexit outcome, only partially offset by the positive impact from fiscal stimulus announced in the 2019 budget,” the IMF said.

The BoE should take a “cautious, data-dependent” approach to monetary policy, it added.

Reporting by David Milliken; Editing by William Schomberg

Source: UK Reuters

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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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UK economy to lose 3.5 percent of GDP in no-deal Brexit – IMF

Britain will suffer economic damage equivalent to the loss of at least 2-3 years of normal growth between now and the end of 2021 if it leaves the European Union without an exit deal, the International Monetary Fund warned on Tuesday.

The world’s fifth-biggest economy could quit the EU as soon as Friday, disrupting its ties with the bloc that it joined 46 years ago, if Prime Minister Theresa May cannot agree a delay with EU leaders on Wednesday.

The IMF said that even in a relatively orderly no-deal Brexit scenario — with no delays at borders and minimal financial market turmoil — the economy would grow 3.5 percent less by the end of 2021 than it would under a smoother Brexit.

“The increase in trade barriers has an immediate negative impact on UK foreign and domestic demand,” the IMF said.

The EU economy would suffer too but by much less than Britain, facing an estimated 0.5 percent hit to gross domestic product compared with a smooth Brexit scenario, the IMF said.

British exports to the EU and other countries which have trade deals with the bloc would face new tariffs and regulatory barriers if Britain reverted to the World Trade Organisation rules favoured by some Brexit supporters.

Supporters of an abrupt Brexit have accused the IMF of making politically motivated forecasts in the past.

In its report on Tuesday, the fund said a worse-case no-deal Brexit scenario involving border delays and financial market turmoil would increase the damage to about 4 percent of GDP by 2021.

The forecasts took into account the British government’s plans not to impose tariffs on most categories of imports in the event of a no-deal Brexit, and also assumed that the Bank of England would cut interest rates.

BoE Governor Mark Carney gave broadly similar estimates of the cost of a no-deal Brexit last month, when he said preparations by government and businesses could mitigate only some of the damage of a no-deal Brexit.

A spokesman for Britain’s finance ministry said the government wanted to leave the EU with a deal but was getting ready for a possible no-deal Brexit.

The IMF downgraded its forecast for economic growth in Britain this year to 1.2 percent from a forecast of 1.5 percent it made three months ago, which would be the weakest since 2009.

Growth for 2020 was seen picking up to 1.4 percent, but in both years Britain’s economy was predicted to grow less than the euro zone, in contrast to before the 2016 Brexit referendum.

“The downward revisions … reflect the negative effect of prolonged uncertainty about the Brexit outcome, only partially offset by the positive impact from fiscal stimulus announced in the 2019 budget,” the IMF said.

The BoE should take a “cautious, data-dependent” approach to monetary policy, it added.

By David Milliken

Source: UK Reuters

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No-deal Brexit – what it might mean for UK economy

Britain is due to leave the European Union on April 12 unless Prime Minister Theresa May can break the deadlock in parliament or asks Brussels for more time, raising the prospect of an abrupt, no-deal Brexit for the world’s fifth-biggest economy.

EU officials said on Tuesday that a no-deal Brexit was becoming more likely and the European Central Bank said financial markets needed to price in the growing risk.

Here is an outline of the potential economic impact for Britain of leaving the EU without the cushion of a transition.

UK ECONOMY

The Bank of England estimates a worst-case Brexit — involving border delays and markets losing confidence in Britain — could shock the economy into a 5 percent contraction within a year, nearly as much as during the global financial crisis.

Output in a less severe but still disruptive no-deal Brexit — in which Britain and the EU avoid snarl-ups at the borders, for example — would fall by around 3 percent.

Over the longer term, Britain’s finance ministry has said the economy could be 8 percent smaller by 2035 after a no-deal Brexit than if Britain stayed in the EU. The hit would be bigger if migration slowed sharply, the ministry has said.

The BoE also sees a risk in Britain’s wide current account deficit. Governor Mark Carney has said the deficit leaves Britain reliant on “the kindness of strangers” and a no-deal Brexit could turn foreign investors off British assets.

Brexit supporters have dismissed the warnings as scare-mongering but say economy is likely to suffer a short-term hit. Former BoE Governor Mervyn King has said the long-term costs of Brexit might not be very different from staying in the bloc.

TRADE

Barriers to trade would be raised for British companies as the EU imposes import tariffs which average 5 percent but are higher for some exports such as cars. Britain’s automotive industry employs more than 800,000 people.

Britain would also lose the benefits of the EU’s trade deals with countries around the world.

For its part, Britain plans to eliminate import tariffs for many products for up to a year in the event of a no-deal Brexit. That would help reduce the inflationary hit to consumers but would expose many British companies to tougher competition.

Manufacturers are also worried about border delays which would hurt their just-in-time production.

Brexit supporters say those fears are overblown because technology would ease any border delays and exports would flow freely once Britain gets a future EU free trade deal.

Deals with faster-growing nations such as the United States, India and China would be a big boost for Britain, Brexit supporters say. But Britain’s official budget forecasters say the benefits of such trade deals are likely to be small.

PORTS AND STOCKPILING

The government has identified stretches of motorway to use as truck parks, and plans to use a small airport in southern England to cope with any tail-backs at ports on the English Channel.

Academics at Imperial College say two extra minutes spent checking each vehicle at Dover and Folkestone could lead to traffic queues of 29 miles (47 km) on nearby highways.

Many manufacturers are stockpiling parts to keep working. A measure of inventory-building hit the highest ever measured for a Group of Seven economy in March. Britain has asked drugmakers to stockpile medicines for six weeks above normal operations.

Brexit supporters point to comments by the head of the port in Calais, in France, who said trucks would continue to move through without delays in the event of a no-deal Brexit.

France has said it plans to hire hundreds of additional customs officers and create extra border control facilities.

HELP FROM THE BUDGET AND THE BANK OF ENGLAND?

Finance minister Philip Hammond has built up a fiscal war-chest to spend more in case of a Brexit shock to the economy.

But he has also warned that, longer term, a no-deal Brexit would mean a rethink of his promise to end austerity because the economy would grow more slowly, hurting tax revenues.

Brexit supporters say leaving the EU with no deal would help the public finances because it would mean an immediate end to payments by London into the EU budget.

The BoE has warned investors not to assume that it would rush to cut borrowing costs after a no-deal shock. A fall in the value of the pound would push up inflation, something that would argue against a rate cut.

But some officials, including Carney, have said their most likely response would be to help the economy.

POUND

Given the likely economic hit, a no-deal Brexit would probably push the pound down, adding to its losses against the U.S dollar of about 13 percent since the 2016 referendum.

Under the BoE’s worst-case Brexit scenario, sterling would slump 25 percent to about the same value as the U.S. dollar.

FTSE

A weaker pound could push up the share prices of many of Britain’s biggest companies which do business around the world such as British American Tobacco and GSK. The companies in the FTSE 100 make 70 percent of their income overseas.

But there could be punishment for the more domestically focused FTSE 250 companies who make half their money at home.

BONDS

The economic shock of a no-deal Brexit would usually spur investors to seek the safe haven of British government bonds.

However, investors are bracing for the possibility of a snap election. The Labour Party has plans for more public spending, potentially including the renationalisation of some utilities and rail operators, which might unsettle investors.

Writing by William Schomberg

Source: UK Reuters

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What would a no deal Brexit mean for the UK housing market?

I was recently asked what would happen to law within the private rented sector in the event of a no deal Brexit.

Initially I did not think much of this question but the current situation is making such a possibility more and more likely.

So what will happen? Naturally, there will be wider consequences economically and socially, but what about the legislation relating to residential tenancies?

In fact, most law will not change. Things like the Housing Act 1988 will remain in law as they are.

The potential changes will come in some areas of regulation and consumer protections where we have regulations which sit on top of and implement EU Directives.

A number of these potential changes would also affect the UK sales market.

The Withdrawal Act
In principle, there should be no change at all. Section 2 of the European Union (Withdrawal) Act 2018 ensures that any legislation which is made to implement an EU Directive under the European Communities Act 1972 will continue to have effect. So, even in a “no deal” scenario there should be no changes, at least initially.

But what about the hardest of hard Brexits where all EU legislation is immediately eliminated?

Energy Efficiency
Well, the entire requirement to have an EPC is based on EU directives. So they would no longer be required.

That also means that the new requirement to have a minimum energy efficiency standard in residential rental property would also go. As would the requirement to serve an EPC in order to be able to serve an S21 notice.

Consumer Protection and Rights
This is the main area of change. Unfair Terms are directly incorporated in UK law in the Consumer Rights Act 2015. But the Consumer Protection From Unfair Trading Regulations 2008 (CPRs) rely on EU legislation.

This would impact the entire sector as it is the CPRs which require that both estate and lettings agents do not provide misleading or inaccurate advertising of residential property, the Property Misdescriptions Act 1981 having been repealed some time ago on the basis that the CPRs were a complete and more substantial replacement.

Likewise the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013, which do not apply to tenancies but do apply to estate and letting agents’ terms of business, would also go, so rights to cancel these agreements at an early stage would disappear.

GDPR
The General Data Protection Regulations would actually remain as they are directly incorporated into UK law by the Data Protection Act 2018. How well they will operate if we are not going to use European guidance and do not have a good relationship with Europe in this area is open to doubt.

Heat Networks
This affects fewer people but the Heat Network (Metering and Billing) Regulations 2014 which require landlords who are engaged in the supply of energy to their tenants to give information about those costs and allow elements of control over that cost are based on EU law entirely. This will affect those residing in blocks with district heating schemes and some HMOs as well.

HMOs and Licensing
The EU Provision of Services Directive and the consequent Provision of Services Regulations 2009 would also not be relevant any more. This would mean that the decision in R(Gaskin) v Richmond would be largely irrelevant and local authorities would be less restricted in the charging of HMO licensing fees.

Money laundering
The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 apply to estate agents but not to letting agents. However, they are made in part based on EU law and rely heavily on EU guidance and the EU sanctions regime. Therefore their ongoing operation is open to some doubt.

Conclusion
So at a basic level nothing changes. An AST would still be an AST. But the substantial overlays added over the years to improve rights and consumer protections would all be put at risk. But as they say, it will never happen!

By David Smith, a housing lawyer at Anthony Gold, and is also policy director at the Residential Landlords Association

Source: Property Industry Eye

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No-deal Brexit could lead to transfer values being cut

Leaving the European Union without a deal could lead trustees to cut transfer values to protect defined benefit pension schemes, experts have warned.

Malcolm McLean, senior consultant at Barnet Waddingham, told FTAdviser recent estimates had correctly predicted a no-deal Brexit would increase pension deficits by billions of pounds.

This in turn could have an adverse effect on transfer values, he suggested.

He said: “Crashing out of the EU without any sort of deal would almost certainly increase market volatility and continued uncertainty as to the future direction of travel for the economy as a whole.

“This could impact on gilt yields and inflation expectations, all of which could have a damaging effect on DB funding levels and transfer value rates.

“In a more extreme scenario, trustees could be forced to cut transfer values in the interests of protecting the fund and holding on to the employer covenant.”

According to analysis from Colombia Threadneedle, UK DB schemes would see their deficit increase by £35bn if the UK leaves the EU without an agreement.

This is because while UK DB funds’ assets would rise in a no-deal scenario, as they are invested overwhelmingly in non-domestic assets, liabilities would increase even further.

If, on the other hand, the government agreed to a softer Brexit, schemes could be in line for a £85bn surplus, as liabilities wouldn’t rise as much.

Mr McLean said a softer Brexit “would bring a degree of certainty to the proceedings, something that markets always like to hear”.

He added: “Whether that would in itself materially affect DB fund holdings and ultimately increase transfer values is not absolutely certain, but it could enable a return to the more stable conditions we have seen in this respect previously.”

Counterbalancing this theory is the possible impact of a no-deal on interest rates.

Sir Steve Webb, former pensions minister and director of policy at Royal London, explained that if the Bank of England felt it needed to cut interest rates again to prop up the economy, then this could also affect long-term interest rates, which could drive up transfer values.

He said: “But the impact on the stock market would also be important. If shares also fell then this could also increase deficits, especially for less mature DB schemes.”

Kay Ingram, director of public policy at national firm LEBC, also believes that transfer values generally would rise in the immediate aftermath of no-deal, due to a weaker sterling combined with low bond yields.

She said: “Schemes with assets invested primarily in global equities would benefit from the continued sterling weakness.

“Using this investment dividend to offload future growing liabilities would make sense for schemes with this asset allocation.

“Those schemes with a reliance on UK fixed interest and domestic stocks would see deficits widen but could benefit if the Bank of England responded to this scenario with interest rate cuts and reintroduction of asset purchases.”

But Ian Neale, director at pensions specialist Aries Insight, cautioned against generalising across all DB schemes.

Mr Neale noted that market factors, including possible tariffs, the proportion of scheme investments dependent on the UK economy, and the business sector in which the scheme sponsor operates will be material for the impact of Brexit for pension schemes.

He said: “The general feeling in the industry seems to be that if UK exit does happen, then it is more likely to depress than enhance scheme valuations.”

By Maria Espadinha

Source: FT Adviser

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Is ‘No Deal’ the Best Deal for UK Construction?

According to a recent report by www.designingbuildings.co.uk just 15% of construction executives favoured a UK exit from the European Union (EU).

In recent times the Bank of England declared a no-deal Brexit could wipe 8% off the UK’s GDP this year – a bigger hit than the financial crisis – potentially taking 30% off house prices, according to a report in www.building.co.uk.

And yet with the prospect of the UK potentially pulling out of the EU with a No Deal Brexit, there are clearly vital potential issues about to affect thousands of businesses around the country – from a lack of clear guidance on regulations, to a shortage of skills, and a potential lack of access to building materials.

One obvious major concern is the ‘divorce’ could potentially result in a lack of free movement which Prime Minister Theresa May is adamant should take place.

Surely this means the skills shortage could worsen and the UK could become a victim of higher development costs whereby labour demand outstrips supply?

Figures from the Office for National Statistics indicate that one-third of workers on construction sites in London are from overseas, with around 28% coming from the EU. This calls into question the range of skills this one-third has acquired given that construction sites need a combination of skillsets to complete work from engineering to bricklaying.

On the one hand the knock on effect of a lack of free movement could result in the decline in the number of houses being built resulting in construction firms failing to meet the government’s housing target thus deepening the crisis of a lack of housing in large cities.

On the other hand, if investors pull out of the UK, house prices could drop – leaving more empty properties available on the market. Either way, it’s difficult for construction firms to know what to prepare for as Britain meanders its way through unknown territory.

A 2010 study by the Department of Business Skills and Innovation estimated that 64% of building materials were imported by the EU. The same report estimated that 63% of building materials were exported to the EU. After Brexit, importers and exporters may face duties or limits on quantities, which could in turn result in an increase in costs, or a shortage of, construction materials.

Brian Berry, Chief Executive of the Federation of Master Builders, says in a recent press release:

The single biggest issue keeping construction employers awake at night is the skills shortage. If we’re going to address this skills gap post-Brexit, the whole industry needs to step up and expand their training initiatives. Even Sole Traders can offer short term work experience placements and large companies should be aiming to ensure at least 5 per cent of their workforce are trainees or apprentices.

‘But realistically speaking, the UK construction sector can’t satisfy its thirst for skilled labour via domestic workers alone. With record low levels of unemployment, we’ll always need a significant number of migrant workers too – particularly in London and the south east.

‘The Government needs to work with construction to amend its Immigration White Paper and rethink the current definition of low-skilled workers. Level 2 tradespeople play a vital role in the sector and would currently be excluded, which is wrong. We urge Ministers to engage with the construction industry to help improve these proposals.’

The Construction Industry Training Board – www.citb.co.uk, – however, expects positive growth for the construction industry but only in the case of an exit deal as opposed to a no exit deal, according to the CITB’s recent press release.

The annual Construction Skills Network (CSN) report – a five-year forecast into the industry’s skills needs – anticipates construction growth of 1.3% across the UK, down a third of a percent on the previous year. The forecast is based on the scenario that the UK agrees an exit deal with the EU, rather than a ‘No Deal’ situation.

The biggest increase is expected in public housing, which is pulling ahead as infrastructure slows. Financial support from Government at both local and national levels is encouraging a 3.2% growth rate in public housing, up half a percent since last year’s forecast.

Infrastructure is set to grow by 1.9%, down from 3.1% predicted in last year’s forecast. The sector has been heavily affected by Brexit uncertainty and by investors stalling construction of the Welsh nuclear power plant Wylfa in January.

Commercial construction is significantly declining due to investors taking a cautious stance in the face of Brexit. The forecast expects the sector to drop sharply this year then level out by 2023, with zero growth anticipated overall.

However, the housing repair and maintenance sector appears to be benefitting from a quieter property market as home owners halt plans to sell up and instead focus on improving their current properties. By 2023, the sector is expected to have grown by 1.7%.

Despite the wider economic uncertainty, more construction workers will be needed over the next five years. An approximate 168,500 construction jobs are to be created in the UK over the next five years, 10,000 more than in last year’s forecast. Construction employment is expected to reach 2.79 million in 2023, just 2% lower than its peak in 2008.

Steve Radley, Policy Director at CITB, said:

‘This forecast aptly reflects the uncertainty, particularly associated with Brexit that we’re seeing across the wider economy. Currently, concerns around Brexit are weighing on clients and investors, creating a knock-on effect on contractors and their ability to plan ahead.

However, assuming that a deal is agreed, we expect low but positive growth for construction.  Even as infrastructure slows, sectors like public housing and R&M are strengthening. This will see the number of construction jobs increase over the next five years, creating growing opportunities for careers in construction and increasing the importance of tackling the skills pressures we face,”

Whether one prefers the notion of a road to opportunity or the wake-up call of a No Deal Brexit, the clock is ticking for the UK’s construction executives as the sector waits for clarity from the UK Government.

By 

Source: Busubess Bewa Wales

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UK economy dodges no-deal Brexit hit, for now

UK economy has struggled beneath the weight of Brexit uncertainty for nearly three years, but many business leaders would probably be relieved just to have more of the same for the next few months.

The risk of a damaging no-deal exit by the world’s fifth-biggest economy from the European Union on March 29 has been averted by the reprieve granted to Prime Minister Theresa May by other EU leaders on Thursday.

But the possibility could return as soon as April 12. Or the delay could stretch into May or beyond, depending on the prime minister’s ability to break the Brexit impasse in parliament.

Employers took some comfort from the postponement, even if it did little to settle the wide range of Brexit outcomes that has led to many of them putting their expansion plans on hold.

“Businesses will accept a short extension because it’s a better alternative to no deal,” Seamus Nevin, chief economist at Make UK, an engineering trade group, said.

“But we really need to make decisions soon. Prolonged uncertainty just means the investment decline of recent months will continue and companies will be forced to decide whether to move production elsewhere.”

Carmakers have reduced expansion plans in Britain and many financial firms have set up operations in other EU countries.

Overall business investment fell throughout 2018, the longest such run since the global financial crisis, and another fall is expected in 2019, threatening to worsen the country’s weak productivity growth.

Britain’s economy lost momentum after the 2016 referendum decision to leave the EU.

The slowdown deepened last year as the Brexit deadline approached, with no guarantee of a transition to smooth the shock, but also reflecting the weakening of the world economy.

While Britain would bear the brunt of a no-deal Brexit hit, U.S. Federal Reserve Chair Jerome Powell has said it is a risk for the slowing U.S. economy, along with Washington’s trade war with China.

The shock would also be felt in Europe where Britain’s closest trading partners are struggling.

“It would be a material shock for the EU at a difficult time,” Brian Coulton, chief economist at ratings agency Fitch Ratings, said. “Among the things that could tip the euro zone into a recession, it might be a candidate.”

Even the strongest Brexit supporters say a no-deal divorce would deliver a shock. But they believe the economy would adjust and flourish once it is free of the constraints of EU rules and can strike its own trade deals around the world.

Gerard Lyons, a pro-Brexit economist, said weak business investment was a long-standing British problem, not just a Brexit one, and he pointed to strong jobs growth and tax revenues as a sign of underlying resilience in the economy.

While his preferred option was for Britain to leave EU with a transition and then hammer out a trade deal, he said a no-deal Brexit would not be a disaster because progress has been made to prepare Britain’s finance industry, ports and logistics.

“It’s like a kick in the groin. It depends how hard the other side wants to kick you, and how well you manoeuvre yourself,” Lyons said.

The Bank of England said on Thursday that about 80 percent of almost 300 companies it surveyed felt they were as ready as they could be for a no-deal, no-transition Brexit, up from 50 percent in January.

The BoE has said a worst-case no-deal Brexit scenario — in which Britain loses the confidence of global investors and chaos hits transport and ports — could mean that the economy is 5 percent smaller in three years’ time than if the country stayed in the EU.

A more managed no-deal Brexit could reduce the hit to about 2.5 percent, still a material hit at a time when the economy is struggling to grow by more than 1.5 percent a year.

Most economists say the higher the barriers for British firms to do business in the EU, the bigger the drag will be on economic growth stretching out into the decades ahead.

Any gains from free trade deals with countries such as China or the United States would be “relatively modest”, Britain’s independent budget forecasters have said.

It is small wonder therefore that many employers are hoping for a change of the Brexit plan, even if it means yet more sapping uncertainty.

“Our country is facing a national emergency,” the Confederation of British Industry, a major employers group, and the Trades Union Congress umbrella group said on Thursday in a rare joint letter to May, urging her to avoid a no-deal Brexit.

“The shock to our economy would be felt by generations to come.”

Writing by William Schomberg; Editing by Toby Chopra

Source: UK Reuters

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Housing minister warns of Brexit’s threat to Scotland’s housing ambition

A “no deal” exit from the EU has potential to cause serious problems for Scotland’s housing sector, housing minister Kevin Stewart has warned.

In a letter to housing organisations and stakeholders due to issue this week, Mr Stewart will highlight the potential adverse consequences of Brexit including:

  • Hurting investor confidence in residential assets and build to rent market
  • Inflation and interest rate fluctuation affecting rents, the financial health of Registered Social Landlords (RSLs) and the availability and cost of finance for new build homes
  • Reduced availability and increased costs of house-building materials such as timber, prefabricated concrete and boilers from non-tariff and tariff barriers
  • Impact on the availability of EU nationals working in the construction and housebuilding sector, as well as housing support services

Speaking ahead of Scotland’s Housing Festival 2019 tomorrow, Mr Stewart said: “The UK’s exit from the EU has the potential to impact the housing sector in Scotland and therefore our housing ambitions. As we strive to provide stability and certainty, our efforts are being compromised by the UK Government’s failure to acknowledge our concerns or discuss compromise alternatives.

“Some 60% of the UK’s building material imports come from the EU and we have a particular reliance in Scotland on imported timber for housebuilding. Many of those employed across the housing sector are EU nationals. The extent to which we depend on EU relations cannot and should not be underestimated.

“We are committed to delivering more affordable homes and are on track to deliver our ambitious 50,000 affordable homes target by 2021, backed by our investment of over £3 billion. We are also investing in energy efficiency improvements to existing homes, making them warmer and cheaper to heat.

“We must not allow the UK Government’s approach to Brexit jeopardise these commitments which also supports our aims to end homelessness, and reduce fuel poverty.

“We will continue to work with the housing sector on Brexit-related risks – with construction, housebuilding and mortgage lending industries in Scotland, as well as through the Joint Housing Policy and Delivery Group.”

Scotland’s Housing Festival 2019 takes place in Glasgow on 12-13 March.

In 2018, the Scottish Government commissioned an analysis of the construction and housebuilding industry in Scotland to understand specific Scottish risks on housing demand, materials and workforce.

Source: Scottish Housing News