Prior and post to the Brexit there was a huge amount of fearmongering, with politicians and financial experts painting a very bleak picture. There were huge scares that various markets including, importing, exporting and property, would see a big hit. So far, however, things haven’t turned out quite as badly as expected. Since the referendum in June, the pound has dropped massively, but things have actually turned out quite well.
UK property still heavily sought after
Housing was a market predicted to take a big hit after the Brexit, especially from overseas. However, property values have seen a rise. Sheffield, Liverpool, Manchester and Leeds saw an average 3.4% increase. Investment within London property is still incredibly high, but the capital is very much in a bubble of its own. It also continues to pull foreign investment, with Chinese interest going up by around 30 – 40%. London has been seen as a ‘long term project’ with investors having faith that the UK will only come out of the referendum stronger. But with such huge potential return on investment, London is in a league of its own in comparison with the rest of the nation, with yields of between 15.7 – 19.9%
An all time low in borrowing rates have undoubtedly been a major factor behind getting new buyers. Just four weeks after the vote to leave the EU came in, the UK’s benchmark interest rate went down to a record low of 0.5%, the lowest for seven years.
Drop in pound could be a good thing
Although a drop in the pound might seem disastrous, especially for holiday goers, things have actually turned out well and have helped the economy on the whole.
The nation has become much more competitive on a global scale. There have been increased exports as well as domestic businesses serving foreign clients. Despite the possibility of a recession still on the cards, so far the population haven’t stopped spending. One of the easiest way to determine an impending recession is spending. Usually when money is short retail therapy and luxury are normally the first things to go, but spending has barely dropped off. TSB commented that the lull was barely ‘visible’.
Trade is the most obvious market to benefit from the Brexit, with better exchange rates meaning more opportunity. Other struggling economies in the UK should also see a boost by the fall in pound. One possibility is seeing a drop in inflation, which has been an issue for a while. Data relating to consumer prices showed that despite a month over month decline in CPI by -0.10%, on an annualised basis, the headline figure rose 0.60%, marking the fastest pace since November 2014. Although this is still shy of the Centre Banks inflation target (2.00%), we can see positive progress being made, hopefully this will be helped even further by the accommodative monetary policy measures, which get implemented by the Central Banks.
The big fears after the Brexit was that the population would stop spending. There was a particular nervousness and doubt, surrounding potential investments, putting them into jeopardy.
Even though there is a possibility that the UK might not even leave the EU, most investment timelines have been re-established. So far the nation has been able to avoid catastrophe. With the drop in the pound considered bad news, on the whole it could help push us towards a well balanced economy without the restraints of the EU