How the economy could look by the end of the year

9th April 2020

By Will Leyland

That being said, we can certainly expect to see some large-scale changes in the economy once we begin to emerge from the current crisis, however that may look. Of course, as we remain in the midst of lock downs across the vast majority of the western world most people’s minds are understandably focused on how we eventually emerge from them.

The most likely options, it would appear for now, are that we either find a vaccine quicker than at any other point in the history of humanity – and that’s absolutely possible on current timescales – or we experience some kind of rolling lockdown during peaks and troughs of the virus spreading, eventually returning to some kind of full normality once the infamous herd immunity has been achieved.

Whenever that is achieved, we will then need to keep in mind that some fundamentals have changed, but some remain the same, and so here are some predictions.

Property

First and foremost, it is highly likely that some kind of fundamental change is going to come in terms of how people think about the Private Rented Sector (PRS) and Buy to Let.

Two things are inescapably true – that the vast majority of young people live in rented property, and that landlords aren’t all evil money grabbing demons.

The narrative that has run wild and unchecked for some time that rental property is some extension of a dark, ruinous capitalist conspiracy can finally be put to bed as the majority of the population realise that most property investors provide an essential and irreplaceable service and that the vast majority look after their tenants and operate honourably.

That, in turn, we expect, will galvanise the government into action to provide sensible and justifiable economic incentives for landlords and investors to be able to invest more heavily in to Buy to Let and property in general.

The second point is that whilst we don’t expect any economic recession or shock to last for a particularly long time, it will bring volatility and as such investment into the stable and profitable UK property sector will increase.

The high street and commercial property probably aren’t going to experience the same durability and resilience as residential, given that there will be significant high street casualties from a lengthy shut down. However, manufacturing may well see a meaty resurgence as globalisation reduces under the pressure of suspicion and fear.

National economies like the UK, Ireland and other Europeans who are predominantly service led could well see a sustained re-introduction of manufacturing as reliance on China wanes under the fallout of the pandemic.

Regardless, residential, much like sovereign debt and bonds, will remain a pretty central plank within sensible and risk-averse investment and as such expect yields to remain strong and even bounce in the coming 12 months.

Put it this way, demand isn’t going away, and supply won’t dramatically increase without some kind of government intervention.

The wider British economy

In broader strokes it’s inconceivable that the current economic model of underpaid and overworked workers at the lower end of the labour food-chain will be treated anywhere near the way they have been for the past decade.

The gig economy model of paying the bare minimum for little or no rights and protections will no longer wash. When push came to shove and the country shut down it was lorry drivers, delivery drivers, food workers, shelf stackers and the low-paid who came to the rescue. To a lesser extent, but with no less contribution, landlords and workers within property, as well as communications and infrastructure, will be viewed in a totally new light, alluding to the earlier point about property in general.

There will be, without doubt, a serious appetite for these types of workers to be rewarded, to be paid better and to enjoy better workplace rights, and they will be given.

Similarly, the current anti-European sentiment appears to be washing away quickly, so it’s also perfectly reasonable to assume that in the coming new year the European project could change its course beyond any recent recognition.

Focus will turn to economic regeneration and co-operation, to re-establishing trade and investment, and towards ensuring recovery together.

Notably, the more recent economic model that has served the current British government so well, of responsible spending, moderate public service investment and austerity-led reduction in social security will vanish. Expect a return to post-war type economics of big government spending, huge levels of investment and a big boom in construction and manufacturing. Tax and spend will return.

Lastly, this recession may be deep, but it will be quick. This is a wholesale different situation to both 2008 and the recessions of the early 20th century. Fragilities and systemic issues in the economic and financial sectors caused a collapse, whereas the modern economy has been forcibly shut down to protect public health.

The collective trauma and mental fatigue of months in isolation should, and will, mean that the majority view the world in entirely new ways. Holidays, trips to the beach, seeing family and being free to leave the house to spend money will be viewed as privileges not fundamental rights and who could argue that once the population are free to return to normality there won’t be an enormous party?

As the world returns to normal, there will be huge amounts of money to be made, as long as you know where to look.

Thinking of extending your current portfolio, or want to enquire about investing in property for the first time? Take a look at our current available investment opportunities, or speak to a member of the team today on +44 (0)161 772 1370.

Did you find this article helpful?

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How the economy could look by the end of the year

09 April 2020

That being said, we can certainly expect to see some large-scale changes in the economy once we begin to emerge from the current crisis, however that may look. Of course, as we remain in the midst of lock downs across the vast majority of the western world most people’s minds are understandably focused on how we eventually emerge from them.

The most likely options, it would appear for now, are that we either find a vaccine quicker than at any other point in the history of humanity – and that’s absolutely possible on current timescales – or we experience some kind of rolling lockdown during peaks and troughs of the virus spreading, eventually returning to some kind of full normality once the infamous herd immunity has been achieved.

Whenever that is achieved, we will then need to keep in mind that some fundamentals have changed, but some remain the same, and so here are some predictions.

Property

First and foremost, it is highly likely that some kind of fundamental change is going to come in terms of how people think about the Private Rented Sector (PRS) and Buy to Let.

Two things are inescapably true – that the vast majority of young people live in rented property, and that landlords aren’t all evil money grabbing demons.

The narrative that has run wild and unchecked for some time that rental property is some extension of a dark, ruinous capitalist conspiracy can finally be put to bed as the majority of the population realise that most property investors provide an essential and irreplaceable service and that the vast majority look after their tenants and operate honourably.

That, in turn, we expect, will galvanise the government into action to provide sensible and justifiable economic incentives for landlords and investors to be able to invest more heavily in to Buy to Let and property in general.

The second point is that whilst we don’t expect any economic recession or shock to last for a particularly long time, it will bring volatility and as such investment into the stable and profitable UK property sector will increase.

The high street and commercial property probably aren’t going to experience the same durability and resilience as residential, given that there will be significant high street casualties from a lengthy shut down. However, manufacturing may well see a meaty resurgence as globalisation reduces under the pressure of suspicion and fear.

National economies like the UK, Ireland and other Europeans who are predominantly service led could well see a sustained re-introduction of manufacturing as reliance on China wanes under the fallout of the pandemic.

Regardless, residential, much like sovereign debt and bonds, will remain a pretty central plank within sensible and risk-averse investment and as such expect yields to remain strong and even bounce in the coming 12 months.

Put it this way, demand isn’t going away, and supply won’t dramatically increase without some kind of government intervention.

The wider British economy

In broader strokes it’s inconceivable that the current economic model of underpaid and overworked workers at the lower end of the labour food-chain will be treated anywhere near the way they have been for the past decade.

The gig economy model of paying the bare minimum for little or no rights and protections will no longer wash. When push came to shove and the country shut down it was lorry drivers, delivery drivers, food workers, shelf stackers and the low-paid who came to the rescue. To a lesser extent, but with no less contribution, landlords and workers within property, as well as communications and infrastructure, will be viewed in a totally new light, alluding to the earlier point about property in general.

There will be, without doubt, a serious appetite for these types of workers to be rewarded, to be paid better and to enjoy better workplace rights, and they will be given.

Similarly, the current anti-European sentiment appears to be washing away quickly, so it’s also perfectly reasonable to assume that in the coming new year the European project could change its course beyond any recent recognition.

Focus will turn to economic regeneration and co-operation, to re-establishing trade and investment, and towards ensuring recovery together.

Notably, the more recent economic model that has served the current British government so well, of responsible spending, moderate public service investment and austerity-led reduction in social security will vanish. Expect a return to post-war type economics of big government spending, huge levels of investment and a big boom in construction and manufacturing. Tax and spend will return.

Lastly, this recession may be deep, but it will be quick. This is a wholesale different situation to both 2008 and the recessions of the early 20th century. Fragilities and systemic issues in the economic and financial sectors caused a collapse, whereas the modern economy has been forcibly shut down to protect public health.

The collective trauma and mental fatigue of months in isolation should, and will, mean that the majority view the world in entirely new ways. Holidays, trips to the beach, seeing family and being free to leave the house to spend money will be viewed as privileges not fundamental rights and who could argue that once the population are free to return to normality there won’t be an enormous party?

As the world returns to normal, there will be huge amounts of money to be made, as long as you know where to look.

Thinking of extending your current portfolio, or want to enquire about investing in property for the first time? Take a look at our current available investment opportunities, or speak to a member of the team today on +44 (0)161 772 1370.

Will Leyland

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