Brexit fears hit UK financial sector

LONDON: A booming financial services industry has reshaped London’s skyline over the past 20 years, with gleaming towers dubbed the “Cheesegrater” and the “Walkie Talkie” testament to its impact.

But Britain’s impending EU exit has raised fears of an exodus of thousands of financial sector jobs, with an immediate impact on its property market.

News agency Reuters has created a Brexit tracker that monitors six indicators to help assess the economic fortunes of “the City” as Brexit talks progress.

In the first edition of the tracker, the indicators largely show signs of a slowdown rather than any transformative decline. One of the indicators – commercial property prices – show prices have dropped more since last year’s Brexit vote than at any point since the global financial crisis between 2007 and 2009, according to property firm Savills.

Vacancy rates have edged up, but not by much.

However, Mat Oakley, head of European commercial research at Savills, says London’s broader real estate story is “surprisingly positive”, despite some selling soon after the Brexit vote.

Oakley points to leasing activity in the City of London being up 17% in the first three quarters of this year over the long term average.

Among questions Oakley was asked asked, were:

Q: Since the vote, what changes have you seen?

A: I think there was an immediate overreaction. The quarter immediately after the vote, there was a bit of panic selling out of the UK retail property funds – those that private investors can invest into. A couple of people got some fabulous bargains as a result of that.

And then I think reality set in. And the longer that this process is drawn out… the easier it is for businesses in the property sector to make plans around it.

We’re already talking to tenants that are committing to London for the early 2020s, and the most notable deal… is Deutsche Bank committing to their new headquarters in the City, which they won’t move into until 2023. Q: Has the mood changed? A: It’s volatile, I think. There is definitely a divide down the middle between the bulls and the bears. I would say domestic investors in particular are more pessimistic about the future than non-domestic investors. But non-domestic investors have ruled the roost in the London market – more than 80% of investment so far this year has been from non-domestic buyers. Q: Are you optimistic? A: I’m optimistic for the short term – I think it would be very odd to say “Everything’s going to be fine”. I think the down-side risks in terms of talk of 100 000 to 200 000 jobs lost in London as a result of (Brexit) are completely unjustifiable. We think there will be some modest job losses over a 5-10 year period. – Reuters