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International Investment Halts Thanks to Brexit Fears

Overseas businesses are calling a halt to the investment in Britain’s commercial property market as fears over a UK exit from the European Union heighten. A new study by RICS, the Royal Institute of Chartered Surveyors, shows that demand in the sector has all but stopped as the June referendum draws ever closer.

The report takes into account all periods since the second quarter of 2015 when the referendum was officially announced and looks at the commercial property sector as a whole, including retail, office and industrial properties.


The EU referendum is taking place 23 June 2016

Image credit: Rock Cohen via Flickr

Confidence has been shaken

The upcoming referendum on whether or not Britain should leave the EU has caused a great deal of uncertainty in many quarters, and such uncertainty will always result in a jittery market. RICS began recording international investment demand for commercial property back in 2014 and the latest results show confidence at its lowest ebb since those records began.

A mere five per cent of all companies surveyed by the institute said that they had experienced increased interest from businesses outside of the UK over the last quarter, a significant drop from the 36 per cent recorded in Q2 2015. Thirty-eight per cent of RICS members went on to say that the EU referendum had caused uncertainty within the commercial property sector and that it was the main reason why overseas businesses were being so cagey about investing in the UK.

Of those surveyed, 43 per cent said that they felt a Brexit would negatively impact the commercial property market in Britain. Compare that with just six per cent who think the outcome would lead to a positive effect and you have a fair idea of why such uncertainty exists.


The EU Referendum has caused uncertainty in the commercial property market

Image credit: Estatesgazette via Flickr

It’s not all doom and gloom

Despite the report showing that the short term uncertainty surrounding the referendum has been negative to the market, overall, the opinion for the longer term remains upbeat. Many experts are predicting that the value of property and land assets will increase once the referendum is done and dusted. People are likely to settle into the result, whatever it may be, and the market will move forward once again, even if the rate in which it increases may be slower than what we have experienced in recent years.

Another point worth mentioning is the fact that this short term uncertainty has not only slowed the interest from overseas in commercial property, but it has also affected the domestic rise of business rates, too. This knock on effect has led to analysts forecasting that the not too distant future may see conditions become beneficial for both those looking to enter into the market and business growth for existing companies.

It is also worth bearing in mind that the uncertainty over the EU referendum is not solely restricted to the commercial property sector. Many other areas of business have seen a downturn of late as 23 June comes slowly into view.


The long term affects of the referendum could be beneficial

Image credit: Jeff Djevdet via Flickr

What the result will be and what happens after all votes have been cast remains to be seen, but we’re confident that the British commercial property market will not only be strong enough to survive, it will also prove to be just as attractive to overseas investors as it was at the beginning of 2015.


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