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In voting to leave the EU, the UK has made probably its most profound economic and political decision in 60 years. But what happens next, and what does it all mean for real estate? In this note we sketch out some of the big issues to watch:

  • The political fallout will be substantial. David Cameron’s resignation will trigger a delay in EU negotiations as a new Conservative leader is selected; a General Election, an Emergency Budget and a second EU referendum reversing the decision of the first all look possible. But a second Scottish independence looks unlikely. The 'Article 50' process for leaving the EU looks unlikely to start soon and is likely to take rather more than the two years it envisages.

  • Many of the immediate issues facing the UK will therefore actually be political rather than economic, and political uncertainty is likely to add to economic and financial volatility. A cut in interest rates now seems plausible, though currency devaluation will make this less necessary. Bringing certainty to markets in the meantime will be a priority for the Government, and there are a number of tools at the disposal of policy makers that can facilitate this, meaning that disruption in financial markets is likely to be substantially mitigated.

  • Most economists feel Brexit will be bad for the UK. The main cause of short-term impacts will be uncertainty about the UK’s future relationship with the EU. This uncertainty is likely to hit trade and consumer confidence. But the UK economy is in good health, so claims of imminent recession are overblown. Financial services, professional services, and ‘tech’ industries are most likely to be affected by a Brexit.

  • Development and construction could be particularly affected by a Brexit. Developments not yet started are likely to be delayed until there is more clarity about the level of demand in the economy. Offices are most likely to be affected, but housebuilding may well hold up in the short term. Longer term, development prospects depend on the state of the economy but also the costs of construction.

  • Investment sentiment is likely to be affected in similar ways to before the referendum. The UK’s openness exposes it to flows of international capital, but investment sentiment depends much more on the outlook for the UK economy than on our strict relationship with the EU. Intrinsic attractions of the UK mean that it looks likely to remain an attractive property investment destination, and not all sectors will be equally affected. Some will benefit. Money diverted away from the UK will not necessarily end up elsewhere in the EU.

 

 

This new second edition report looks at what might happen now that the UK has voted to leave the EU. It discusses the likely timetable for Brexit, the possible impact on the UK economy and what alternative trade structures might be available for the UK to join.

Find out more in the second edition of our EMEA Major report: Continental Drift – The Wider Economic and Property Market Implications of the UK Referendum on EU Membership, September 2016

 

 

 

CBRE's latest updates on the EU Referendum results

 

The Referendum outcome leaves Britain unsure of what it has done and the world unsure of the wider implications. The complex task of unwinding and resetting the UK’s relationship with the EU is likely to take many years and dominate UK and, possibly, EU politics for the foreseeable future. There are implications for the whole of the EU not just the UK and these could be both positive and negative.

Find out more in our EMEA Economic ViewPoint – The Wider European Impact of the UK’s Vote to Leave the EU  June 2016

This new second edition report looks at what might happen now that the UK has voted to leave the EU. It discusses the likely timetable for Brexit, the possible impact on the UK economy and what alternative trade structures might be available for the UK to join.

Find out more in the second edition of our EMEA Major report: Continental Drift – The Wider Economic and Property Market Implications of the UK Referendum on EU Membership, September 2016

Key contacts

Miles Gibson

Head of UK Research

Miles Gibson

T: +44 20 7182 2738
miles.gibson@cbre.com

Nick Axford

Global Head of Research

Nick Axford

T: +44 20 7182 2876
nick.axford@cbre.com

Neil Blake

Global Head of Forecasting and Analytics | EMEA Chief Economist

Neil Blake

T: +44 20 7182 2133
neil.blake@cbre.com