With a referendum date set for June, there is no getting away from the fact that we are facing a definite answer on the ongoing EU debate.
What are the negatives to leaving?
Experts believe that by being part of the European Union, the UK receives significant foreign investment from many of the large economies such as the US, China and Japan, who as they have strong trade links with the UK, view the country as an easy gateway into Europe. The US have already responded negatively to the prospect of the UK leaving the EU, saying that it wants the UK to have a ‘strong voice at the EU table’.
In the short term, experts believe that leaving the European Union could lead to a significant slow-down in investment from such countries – for the wider economy this would be very negative, with many markets heavily reliant on overseas investment - an open letter has been published signed by major retailers including Sainsbury’s, Tesco and Next and banks such as Lloyds and Royal Bank of Scotland, backing the continuation of membership.
Long term, it is likely that the overseas organisations would continue to build links with the EU, continuing to effectively cut the UK out altogether. Driven by free trade, no border controls, no import VAT/duties and simplified compliance measures, this method would offer a better way of working on paper for many large overseas corporations. With this in mind, some experts believe that staying in is overall a safer bet for ongoing financial stability of the country.
What are the positives to leaving?
A ‘Brexit’ (British Exit) is being widely publicised and is leading to many people arguing that leaving the European Union will help attract business to the UK due to the current instability of the Eurozone, that EU legislation burdens on small business will be lightened and that the UK will regain more control over its immigration policies.
There are a variety of thoughts as to how well the policy will be able to be implemented in real terms, and it is impossible to predict the outcome of such a major policy change – especially with regards to interest rates. It is fair to assume that as the UK is widely regarded across the world as a safe financial market, and removal from the EU could help strengthen the demand for the pound against other world currencies – although it is likely that this would be a short term boost.
Norway and Switzerland have both prospered outside of the EU and operate independently, however it is unlikely that the UK would be happy with the Norwegian model, upon which they are still bound by EU regulations with no say or voting power.
I'm a landlord. Would it be good for me if we left?
What seems like bad news for the county may in fact be positive for you as a landlord. If you already own a property and are looking to let it, you are potentially in a fairly strong position.
Many potential home buyers are concerned about what changes in Europe means for house prices, and as such are holding off buying a property until they are more confident about the future, so may turn to the private lettings market as a solution.
Should we see a slowdown in investment from overseas, there may be the potential for a rise in unemployment levels. Historically, in times of financial uncertainty, the UK rental market becomes more buoyant, with more households choosing to rent than commit to a mortgage during these times.
European uncertainty aside, ARLA has estimated that there will be a 9% uplift in the requirement of households requiring rental accommodation over the next decade, so we are expecting to see an upturn in demand whatever is decided in June.
I’m still not sure…
It’s not all good news though.
Many landlords are reliant on tenants from EU countries to let their properties, and if the UK exit the EU they could find it difficult to let their properties as easily. As part of the EU, European tenants can rent privately in the UK with no visa requirements. Without EU membership, this could become more complicated, especially in light of the new Right to Rent legislation.
HSBC has warned that should the UK exit the EU, the country’s economy would suffer, with 1.5 percentage points will be knocked off the 2017’s GDP growth rate – this represents a financial measure of all the goods and services a country produces, at the end of 2015 the UK reported a GDP of £1,789,046*. Experts believe that this slowdown would affect rental growth, however there is no estimation as to how much.
Has anything like this ever happened before?
The best example of something like this in recent years is the Scotland Independence referendum. Analysis of the market during this time shows slower house price growth in Scotland, with 10% fewer transactions relative to England. The short lead in to the EU referendum means that the impact may not be as sever, however you should expect some turbulence leading up to June 23rd.
If you need any further advice on how the referendum will impact you, contact the team on firstname.lastname@example.org, or 0800 689 9955
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