Backtrack just a couple of years and the doom and gloom surrounding the London financial markets was having a serious impact on London property prices. There was talk of large financial institutions retrenching themselves back to the European Union in light of Brexit. There was talk the EU would look to unseat the UK as one of the world’s leading financial markets. However, a recent report by regulatory consultancy Bovill’s has cast a very different light on the situation.
One thousand financial firms set to move to the UK
Official data from the Financial Conduct Authority (FCA) shows that a staggering 1000 EU based firms are now looking to open UK hubs in light of Brexit. These are companies with a significant exposure to the UK financial sector and UK clients. As talks regarding a deal between the UK and EU on financial services continue, many EU companies are already making their own arrangements. So, the opening of 1000 new financial offices across the UK will create not only demand for office space but also residential property.
UK property market recovery
Since the end of 2019, when the direction of travel towards the end of Brexit became clearer, there have been signs of recovery in the London property market. While nobody is suggesting we are over the worst and all of the uncertainty has gone, it does appear that with a significant majority Boris Johnson can at least try to play hardball with the European Union. Quite where this will get the UK government remains to be seen, especially with financial services, but European businesses still need access to the ultra-liquid UK financial markets to refinance their balance sheets.
So, we can certainly expect increased demand for London residential property and those markets within commuting distance. However, we will also see many of these financial hubs based outside of London taking in the likes of Manchester, Birmingham, Leeds, Milton Keynes and Bristol. When you bear in mind how “hot” the Manchester, Birmingham and Leeds property markets are at this moment in time, an injection of significant demand with limited supply can surely only push prices higher?
UK firms looking towards Europe
Interestingly, the same report suggests that more than 300 UK financial institutions are looking to open new EU hubs. In the past, with the EU seen as one market, there was no need to have a physical presence in another member country in order to service clients. The situation will be different going forward, no matter what kind of arrangement the EU and UK come to, so it appears that UK firms are following their EU competitors.
There were already signs that the London property market was starting to recover in light of a more balanced and less volatile political environment. Whether you agree or not, Boris Johnson has a significant majority in the House of Commons and will be able to push through his version of Brexit. There will be some friction between the UK and the EU during trade negotiations and despite UK government denials we may well see an extension to the transition period. However, this report suggests that the UK financial sector is still extremely attractive to EU companies.
While much of the focus on new UK financial hubs will be upon London, it is interesting to see Manchester, Birmingham and Leeds in particular set to benefit. These are property markets that have been more buoyant of late so we can only imagine what an injection of further demand would do to house prices. Is this a side of Brexit that the remainers don’t want you to see?