I was pleased to see that business leaders have now joined the official debate on Europe – In or Out? So what does all this mean for real estate in the UK?
There is no wrong or right answer. Indeed neither scenario means the end of the world, however I do have a firm opinion and for better or worse, I’m prepared to openly share it.
My view is formed not only in terms of real estate impact but also as a UK business leader with over 2,500 employees. There are several key elements which support a strong property industry in the UK:
- Skills – our construction industry is facing an epidemic shortage in skilled labour, to the extent that we are heavily reliant on international people to support it. This situation will get worse over the next 10 years as a huge proportion of the industry reach retirement age and are not being replaced by UK next generation. There is no evidence that our education strategy will address this domestic gap so we are reliant on skills migration to continue in to this country.
- London, the capital – for many businesses, London is not only the financial centre of the UK but the business capital of Europe. 250 foreign owned banks are based in London and it is the first point of arrival for many international businesses into Europe. Whilst London’s dominance would not be eroded overnight, the capital would start to lose out to other major centres such as Frankfurt, Paris, Switzerland or even Dublin.
- Exports – you may ask what have exports got to do with the property industry, but much of our manufacturing and production industries are reliant on over half of all British goods being exported to the continent. In addition, 40% of our service exports are sold to the EU and 2million of our UK nationals work there. We know that the EU brings a lot of regulation and bureaucracy but the risk of an exit would put further unwanted pressure on production and manufacturing industries.
- Sentiment – in some industries sentiment would not be of a relevant measure, but in terms of property investment and business occupier decisions it is extremely important. Part of the UK’s success since the global recession has been its ability to attract inward investment and international people. They are attracted to the UK because we are transparent, trust worthy and open. At the moment, being seen as an island state, but attached to Europe is a real advantage. If we were to turn our backs on our biggest trading partner, then that would change the very culture of our country from an open environment to a more closed insular one.
There are two aspects about the EU Referendum which will truly test the political metal of David Cameron. The first is speed of decision. 2 years is a long time to wait during which time more uncertainty will creep into the market environment and have a negative effect on decision making around real estate investment and occupation.
David Cameron has also promised reform – we are yet to hear what this will comprise, but it will truly test his ability to negotiate with other international leaders and the political community. I very much doubt this reform will be material. It is a high risk campaign but one on which his future legacy will rest. I truly hope his confidence behind a lectern is transferable to effectiveness in one-on-one negotiations.
I believe it is in the UK’s national interest to stay within Europe. Yes, I want to see reform and less bureaucracy, but I also want to be part of a nation which is truly connected, open to new ideas, attracts a more diverse range of people and is prepared to adapt when global issues such as migration and urbanisation become a challenge for us all to face up to, not just for a few.