The latter part of 2019 became a watershed moment for UK politics and Boris Johnson. Since becoming Prime Minister in the summer of 2019, Johnson had been unable to push through his Brexit proposals. A division within parliament and between the two main political parties meant proceedings had reached an impasse. A December general election was called, with the Conservative Party winning an overwhelming mandate. After a three-year journey and three Prime Ministers, the UK is no longer a member of the European Union (EU). True to Boris Johnson’s slogan, ‘he got Brexit done’. However, this does not signal the end of the merry-go-round of politics, 2020 will see the government embark on Phase II – the trade talks and outlining of the future relationship with the EU.
NEXT PHASE OF BREXIT & TRADE
The UK is currently in a period of transition with the EU until the end of 2020, with both sides hoping to reach an agreement by that time. The negotations are expected to cover all matters of trade, which touch on parts of the economy as diverse as the financial sector and as emotive as the fishing industry, to name just two. Movement of people, services and goods will be the backbone of the talks. However, the short timeframe for such deliberations are a cause for concern, and uncertainty amongst businesses is expected to rise again. Whilst our research shows that businesses have been resilient when making real estate decisions through Phase I, the impact of Brexit on specific industries will now gain greater scrutiny throughout the year.
Yet, a trade agreement with the EU is one of many that the UK government is hoping to secure in 2020. The US, the Commonwealth and China are all on the list too, yet a backdrop of tense trade battles in 2019 will make for a less than smooth path. Even though trade between the US and China is normalising there are many more obstacles along the way, not least of all if the UK adopts Chinese 5G technology and the arguments surrounding its suitability from a security standpoint. However, should the government be successful in achieving agreements with nations around the world, it is expected to give the economy, albeit towards the end of the year, a boost into 2021.
There are other factors at play that may derail economic growth, impacting businesses both domestic and international. The Coronavirus is one such issue, affecting global trade, travel and tourism. The rapid spread of the virus within China and the subsequent health warning by the World Health Organisation will have a significant impact on the global economy. The last such global health scare on this scale was the SARS epidemic, also originating in China back in 2002. However, the dependency on Chinese manufacturing and products from mobile phones to clothing back then was considerably less than it is now. Containing the virus will be imperative for global economic growth, but it will come at a price. Not least of all in the UK with a reduced number of tourists and business events. It is not just the recent virus outbreak that threatens people and businesses alike. The continued unrest in the Middle East and tensions between the US and Iran have the potential to escalate, which could further impact oil trade and subsequent prices. Ironically, in the same vein climate change is another equally derailing factor, with varying degrees of national, corporate or even individual support ahead of a UK led COP26 summit at the end of the year. The inbox for any political or even business leader for 2020 is full and wide-ranging.
FOUR MORE YEARS
It’s election year in the US. President Donald Trump is vying for his second term in office. Having recently avoided being removed through impeachment, Trump will head into the 2020 elections galvanised. His win in 2016 resulted in a clear split in the US population; expect this to rear its head once more. How a second win will impact businesses here in the UK is not yet clear. As election season kicks into full swing, we will get a better measure from his electioneering and rhetoric. as to the likelihood of a US-UK trade deal. Conversely, with no clear winner in the Democrat nominee race thus far, what a non-Trump presidency would look like is a distant reality at this point. Whilst not on the same scale as the US elections, in the summer of 2020, London is also heading back to the polling booths to elect its Mayor. The London mayoralty is currently held by Sadiq Khan; a position of considerable sway not just at a local level,but also nationally and internationally. The economic contribution of London to the UK is vital. Ensuring that this is preserved through trade agreements and future relationships around the world will be key for the next Mayor. On the ground, supporting the growth of existing and emerging business districts will be important for London to compete with other cities around the world and the UK. 2020 looks set to be an eventful year for economic growth. Here in the UK, businesses have so far navigated Brexit, economic sluggishness and political upheaval, rather well. It seems whatever 2020 has in store, firms will prepare accordingly. We do not expect business uncertainty levels to dissipate this year and caution regarding real estate decisions will prevail.