Brexit - three months to go

What progress has been made?

It is fair to say that we know a lot more than we did this time last year. There have been a number of key areas of breakthrough – for example:

• clarity as to the extent to which EU laws will be transposed or retained on Exit Day has been achieved in the European Union (Withdrawal) Act 2018, coined as one of the most constitutionally significant pieces of legislation in recent memory;
• “Theresa May’s deal” - despite a great deal of political controversy, the text of the Withdrawal Agreement has been finalised (governing, amongst other things, the 21-month transition period during which time the UK will continue to apply EU law and be bound by the jurisdiction of the Court of Justice of the European Union) and was officially endorsed by the European Council on 25 November 2018;
• the Political Declaration has been agreed and published; while not legally binding, this sets out what the future EU/UK relationship might look like; and
• it is clear that domestically the approval of Parliament will be required before the Withdrawal Agreement can be ratified – this has become known as the “meaningful vote” and is scheduled to take place on 11 December.

The remaining “unknowns”

Despite everything that has been achieved, there remain a number of “unknowns”, including questions on the Irish backstop and future trade relations. Certainly, the biggest “unknown” at the time of writing remains the question of whether Parliament will approve the Withdrawal Agreement. If MPs reject Theresa May’s deal, it is not clear what the route forward will look like – possibilities range widely and include leaving without a deal, renegotiating the deal, a “People’s Vote” (second referendum) or even a general election. Timing remains a crucial issue, as the Article 50 clock continues to tick (assuming that the Article 50 notification is not revoked in the meantime). All we can say with certainty, is that the outcome of the meaningful vote will be key to determining the next steps.  

The resilient UK property market

Economies run on confidence. There are, of course, many factors involved in determining the mood and movement of the UK property market – but few have a bigger impact than uncertainty. Whilst it may be both obvious and trite, pending agreement being reached on the future relationship of the UK and the EU, uncertainty prevails. However, despite being plagued by Brexit anxieties, the UK’s real estate market has proved to be surprisingly resilient.

The Financial Times has described the performance of the London commercial property market since June 2016 as having “defie[d] doomsayers”, with “fears of a Brexit slump [having] been replaced by the exhilaration of a deal making frenzy”. Certainly, a number of high profile transactions lend weight to this argument: billion pound deals have taken centre stage, as the “trophy” skyscrapers known as the “Walkie Talkie” and the “Cheesegrater” were each acquired for record prices of over £1bn, UBS’ London headquarters changed hands for £1bn, and Goldman Sachs’ new London headquarters was snapped up by South Korea’s National Pension Service for over £1.1bn. Facebook, Apple and Amazon have flocked to London to take up hundreds of thousands of square feet at Kings Cross, Battersea Power Station and Shoreditch – no doubt contributing to London being ranked as the top city for global real estate investment in 2017 - and, in the first half of 2018, overseas investors spent more in the central London commercial property market than in the commercial property markets of central Paris, Frankfurt, Manhattan and Munich combined. Strong results aren’t just limited to London, either - investment into UK regional commercial property reached £4.8 billion in the first quarter of 2018, 26% above the long-term average.