The race to replace the hapless Theresa May as prime minister is down to two candidates—Boris Johnson and Jeremy Hunt. The winner will be known on the July 22, and it seems almost certain to be Boris Johnson.
Johnson is staking his entire credibility on being the only candidate capable of delivering Brexit by the deadline of October 31. He is committed to leading the UK out of the EU by that date, without any deal if necessary. For him, it is “do or die”, and if he fails to convince the EU to renegotiate, or the UK Parliament to vote his deal through, he is destined for the chopping block, like his predecessor.
In contrast to Theresa May, Johnson has a Leave pedigree and was instrumental in persuading the voters to decide by a slim majority to leave the EU. Johnson is beloved of the Tory supporters in the shires, but loathed north of the border in Scotland and derided in Europe as a buffoon and a dilettante. Still, he’s a recognized vote-winner, and his charisma would be welcomed by many as a stark contrast to that of his predecessor.
With his unruly mop of blonde hair now somewhat tamed and a new lady by his side, under normal conditions he would see this as his historical chance to follow in the footsteps of his hero, Winston Churchill, in leading a beleagured Britain to its ‘independent’ destiny.
The 124,000 members of the Conservative party, who have the exclusive right to select the new prime minister, prefer a no-deal Brexit to staying in the EU by three to one, according to polls. This is in contrast to the public at large, which pollsters say would now prefer, by a margin of three to two, to staying in the EU rather than crashing out with no deal.
Then there’s Nigel Farage. The leader of the newly-founded Brexit party was the big winner in the recent European elections in the UK, which nobody in Britain expected they would have any involvement with in the first place, since they were expected to have long since departed the bloc. The charismatic Farage has threatened—realistically—that the more than 30 percent of the votes his party won in the elections could be repeated should new national elections be called in Britain as a result of a failure to leave the EU by October.
The populist Farage and his increasingly virulent supporters are targeting an all-out exit with ‘no deal’, and Johnson too is threatening to crash the UK out by October, no matter what the Europe negotiating team are prepared to accept. Which will be nothing new, other than that which they’ve already conceded to Theresa May. That’s the official line, and nobody’s budging on it yet.
The effects of the chaotic Brexit situation on real estate are harder to decipher. A weaker pound sterling makes UK property more attractive for global capital, and London isn’t going to lose its reputation for dynamism and innovativeness overnight, even if Brexit DOES go ahead at the end of October.
A recent report by Capital Economics said that UK real estate investment activity fell in April this year by 40 percent compared to a year ago, in the month after the UK was supposed to have left the EU. With a total of €11.2bn of commercial real estate traded in the first quarter, the figure was 20 percent lower than the corresponding quarter last year. The Capital Economics researchers expect activity to soften even further throughout this year.
And new research from real estate digital platform BrickVest shows that investor sentiment for the UK commercial property market has dropped in popularity among both international and domestic investors, with Germany emerging as the biggest beneficiary. In its quarterly survey of over 6,000 real estate professionals, the BrickVest Barometer shows that less than a third (29 percent) of international investors view the UK as their preferred market, with support among UK-based investors for their home market falling to 40 percent, its lowest level since the Barometer was launched in Q1 2017.
All of this can change over the coming months, as the new Conservative leader sets out his stall, and challenges Europe to address a set of new concerns. Several scenarios could play out—a new national election, a second referendum, complete stalemate and Britain crashing out to start immediately afresh under World Trade Organisation rules, or a further postponement of the day of departure.
One thing is certain—Britain will be divided on the issue, no matter what the outcome, for years and decades to come. Half the country’s voters will feel aggrieved and bitter, and there’s no telling what consequences this will have. Unhappy times, indeed.
Redakteur bei REFIRE—Real Estate Finance Intelligence Report