Nobody knows exactly how things will work in the long run – further negotiations about future relations between the UK and the EU will begin soon, this hopefully will give the market some certainty.
If all goes to plan, a deal could then be approved by both parties in time for 29 March 2019. On 2 March, Theresa May delivered a speech outlining the government’s position on the UK and EU's future relations.
Political instability usually leads to confusion and doubt amongst the majority of investors. Whilst institutions and HNWI have been pouring into London over the last few years, the mass market has been mainly observing from the sidelines. Whilst still very interested in what’s going on, in reality, most individuals are waiting to see what will happen, if anything, with Brexit.
Will the banks all leave? Will the recent influx of startups, multinational Tech firms and VC’s dry up or will they perhaps up sticks to Dublin or to Frankfurt? Is the pound going to continue to go lower? And finally, will house prices come crashing down in London?
The answer to all these questions is more than likely, will be No.
The pound started to recover months ago. Most respected commentator’s predict the recovery will continue or even speed up with rate rises in the US. As further example, there is 4.5 times the amount of VC in London than there are in Paris over 3x more than in Frankfurt. Apple and Google have both invested over £1 billion into new super offices in prime London. The banks aren’t leaving, the reality is there is nowhere for them to go. Frankfurt doesn’t have the infrastructure and English is not the first language.
Whilst Dublin is a fantastic city to visit, with a lot to offer smaller firms, the reality here is that the capacity to house big banks is very limited. The tallest office tower in the entire city is 14 stories.. This is why the outcome of Brexit negotiations, whichever side “wins” in my opinion is not a deciding factor on the future of the city of London.
A question that we often hear “why are HNWI or institutions buying so much in London despite the uncertainty of Brexit?”
You’d have to ask Eric Schmitt and Tim Cook exactly why they choose London. But according to people close to the deal, the low pound had little to do with it. It’s the talent pool. People want to work in London because they want to live in London. Why? because it’s a wonderful city and around every corner there is history, culture, excitement, drama and fantastic places to eat! That means companies need to be based there in order to attract the best possible talent. Technology, Finance, Fintech will remain and will be ever present in London and that’s because it is where people want to be.
Along with desirability, the capital has some of the best schools and universities in the world for both domestic and overseas students to get a taste of London life, whilst studying. There is over 1 billion people in China and over 1 billion people in India both countries with ever expanding middle classes, that are parts driven by a strong desire to educate their children in London or in the rest of UK. Many underestimate the amount of money still to come out of these ever emerging markets. London (The UK) also has a transparent legal system that is globally recognized and trusted by both institutions and individuals all over the world and whilst its seen a change in stamp duty recently (which only negatively effected super prime) . London is still one of the most tax efficient places to invest in real estate.
It’s a very interesting discussion that could go on for weeks. What I’m sure of is that, if you look at London like the big institutions do “on a mid to long term basis” you will see fantastic returns from the capital of the UK.