Initial fears of a sharp uncertainty-driven slowdown in the economy have, as yet, proved unfounded, with GDP continuing to grow at a healthy 0.5% pace in the third quarter of 2016. This healthier-than-expected picture of growth has echoed across various economic
indicators. Sentiment in particular has bounced back after slumping initially in July 2016, following the June vote to leave the European Union, so it would seem that British consumers and businesses are looking to carry on pretty much as usual despite the Brexit vote. At the same time unemployment has continued to fall and in October 2016 retail sales grew at their fastest annual rate for 14 years.
There remains little conviction around what sort of relationship the UK will eventually have with the EU, although with the government seemingly taking a hard line against the free movement of EU citizens to the UK the probability of a “soft Brexit” may be more limited than previously anticipated. That said, negotiations are yet to begin and speculation is constantly evolving. So with the only certainty in this process being uncertainty there is still significant hope that a mutually beneficial agreement will be reached. Whatever does happen, both the UK government and the Bank of England have made it clear that their primary focus throughout will be to maintain the stability of the British economy, whether through accommodative monetary or fiscal policy. The Bank’s policy interest rate, for example, has already been cut to a new historic low of 0.25% and is likely to remain at that level for the foreseeable future, something that will be supportive of the country’s underlying economy and real estate markets.
Source : M&G Real Estate