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The main headwind for the UK will be the world economy, which will continue to become more volatile in 2020.


The US presidential campaign and the election in November will not lead to any softening in China-US trade tensions. The impacts on the real economy are evident. According to the World Trade Organization (WTO), world trade in goods grew by only 1.2% in 2019 – the weakest year since 2009. While the WTO is still predicting 2.7% growth this year, this forecast is under pressure. Despite ebbs and flows, it will become more evident during 2020 that globalisation is slowing and even going into reverse, with “regionalisation” the new watchword as the world solidifies into trade blocs – the US, the EU and China. The big question for the post-Brexit UK is how the country fits into this: does it have to choose, and if so, what will its decision be? And more generally, will the world become even more fragmented as trade barriers go up in response to populist politics?


The UK economy will see a noticeable bounce over the first half of the year, but the realities of Brexit and the global situation will bite as the year progresses.


It is now inevitable that the UK will leave the European Union on 31st January 2020 following parliamentary approval of Boris Johnson’s renegotiated withdrawal agreement. The removal of the threat of a Corbyn Government and greater clarity over Brexit will lead to long-delayed investment and expansion decisions being made. But exuberance could be relatively short-lived as the reality kicks in: the UK now has less than 11 months to negotiate the future trade relationship with the EU before facing another potential ‘no deal’ cliff edge.


Nevertheless, the UK economy will remain solid with 1.0% expansion expected in 2020 after an estimated 1.3% in 2019 – although Oxford Economics is forecasting stronger growth of 1.9% in 2021, assuming a trade deal is agreed within Johnson’s timeframe. Together, this will confirm investors’ belief that the UK economy rests on strong foundations and that it will remain, in the longer term, one of the developed world’s best performing economies.


The winter election of 2019 will prove to be a turning point in British politics.


While doubtlessly remaining committed to ensuring strong economic growth, the Conservative Government may become less attuned to the needs of business over the next few years. Its base is moving away from urban professionals and the rural wealthy towards a more varied electoral coalition that includes more blue-collar voters. It is likely to be more open to higher levels of public spending in areas such as health, social care, education and infrastructure, and a wave of deregulation and tax cuts is unlikely, at least in the short term. Some of this spending will help the real estate sector by boosting the economy.


Regional cities will benefit from improved transport, which may enhance regeneration projects, while renewed road spending may open new sites up for development. However, although it will remain keen to maintain a strong economy, the Government may not be quite as ready to listen to the industry as it has traditionally been. A big question for our sector is how a Government that draws its support from towns and rural areas will govern an economy that is increasingly dependent on the prosperity and dynamism of cities. Nevertheless, the initial signs are that the Government will continue to increase its attention to sustainability and climate issues, and that it will use the COP26 UN climate change summit in Glasgow to highlight its commitment to international solutions – an antidote to the negativity around Brexit.


UK Property Predictions 2020


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