Economic Overview

2019 finished with a new government, a majority in parliament and a palpable sense of relief that there is likely to be a little more political stability in the UK going forwards. The uncertainty that has dogged the economy has been lifted to an extent and there has been an immediate positive reaction from the financial markets. The property markets too have picked up with a flurry of activity witnessed before the Christmas break and after, giving a positive outlook for the start of 2020.

The uncertainty of 2019 has gone for now, we will leave the EU on 31 January and business and the economy in the short term will play catch up. There is the need to negotiate a trade deal with the EU by the end of the year, a deadline which for now is some way off but will come into sharp focus in the coming months. The new government have a lot to do.

The reality is that the economy slowed in 2019 with GDP growth expected to be confirmed at an annual low of 1% and practically zero for the last quarter as a result of BREXIT uncertainty and the snap election which caused investment decisions to be put on hold. Growth in 2020 is expected to improve from this low base and with a post-election bounce the Bank of England are forecasting a 1.6% uplift for the year. Likewise, the inflation rate fell in December to 1.3% and is now someway below the BoE target of 2%. There have consequently been calls for a cut in the interest rate from its current 0.75% although the MPC this week have dismissed any change as it is felt the economy is picking up.

The property markets are showing a great deal more activity at present. There is an air of enthusiasm to do business which we have not seen for some time as a layer of the uncertainty seen over recent months has been removed. Demand for investment into London and in particular the city is at an all-time high. The majority of the retail funds are seeing net inflows again suggesting an uptick in activity to be expected and we finished 2019 with the highest commercial auction success rate seen for 3 years at 92%. The residential investment, development and student markets have seen a marked increase in investor appetite and at grass roots level our post-election residential auction turned a significant corner. There are many reasons for optimism across the Allsop markets.

Ed Dunningham

DL +44 (0)20 7543 6739