There is a real danger that Operation Juddering Climax could become Operation Thundering Halt.
“Juddering Climax”, of course, is a classic Borisism, coined at last autumn’s Conservative Party conference to describe his ambitions for the last months of his mayoralty. At MIPIM this week his deputy, Sir Edward Lister, used it too, telling EG that the last weeks of the mayor’s administration would yet peak.
But “Thundering Halt” felt more appropriate under Cannes’ grey skies, with the threat of Brexit a clear and present danger, in real estate terms at least. In the Economist Intelligence Unit’s ranking of threats to the world economy, published this week, a hard landing in China was the biggest and a Donald Trump presidency the most eye-catching, but there was only one that occupied minds along La Croisette.
In the event of Brexit, valuations would fall by 10%, said one sage. Three months of uncertainty and a pause in activity that is already well under way could cause a 30% fall in investment volumes this year, was the view of another. (“I’d take a 10% fall,” said one valuer, looking on the bright side.) There was talk of all but a handful of UK institutions being out of the market until the position is clear (p31).
Surely it doesn’t matter to the rest of the world, which accounts for a growing slice of the investment market? Well, ask the Japanese bank which sent a delegation to Cannes with the express purpose of finding out what Brexit might mean for real estate investment in the capital.
At one Estates Gazette debate in the Palais, I asked whether the UK would Brexit. Half the room said no; just one of the 100 or so present said yes. Emphatic, you might think. But it did mean half the room simply didn’t know.
While few businesses are taking a public stand, private mood music is emerging. Bilfinger GVA has been conducting an internal survey of its 700 directors and associates. An impressive 85% of its people believe the UK should remain a member of the EU. Were it to leave, 74% believe we would experience lower growth levels in the short term, and 61% think a reduction in growth would be likely over the longer term. About the same number expect a reduction in occupier demand for financial services. This figure rises to 76% in London.
Around 70% believe less capital would flow into the UK property market as a result of Brexit, with the same number believing the capital’s international status would decrease. And some 75% of respondents in London felt that Frankfurt’s threat as a competitor to the City of London would increase.
It’s going to be a long three months.
Nearly but not quite. Right up until doors opened, the British contingent at this year’s MIPIM was set to be the largest. But a late surge of domestic delegates saw the French emerge on top for the 27th of 27 MIPIMs. That said, there were more UK companies than French in town. Does it matter? Symbolically, yes. And as we all know, symbolism matters.
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