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Economic Review – July 2021

UK growth forecast upgraded

The International Monetary Fund (IMF) has sharply increased this year’s growth forecast for the UK, although recent data does suggest the country’s strong economic rebound has begun to slow down.

In its latest assessment of global economic prospects, the IMF highlighted a worrying divergence in fortunes between rich and poor nations, due to differing access to COVID vaccines. Growth across all wealthy countries in 2021 is now predicted to be half a percentage point stronger than the IMF’s previous forecast published in April, but a similar-sized downgrade for other nations means the overall global growth forecast remains unchanged at 6%.

For the UK, the international soothsayer is now predicting growth of 7% in 2021 which, together with the US, is the joint-fastest rate among the G7 major advanced economies. This represents a sizeable upgrade from the previous forecast, which the IMF attributed to faster growth between February and April, when the success of the vaccination rollout and furlough scheme meant that the UK economy performed better than had been expected.

More recent data, however, does suggest UK growth has slowed across the past few months. The latest gross domestic product figures released by the Office for National Statistics (ONS), for instance, showed the economy expanded by 0.8% in May. While this was the fourth successive month of growth, the figure was significantly lower than April’s 2% rate and below market expectations.

Furthermore, survey data suggests the country’s economic rebound slowed again last month, with the IHS Markit/CIPS flash composite Purchasing Managers’ Index (PMI) dropping to 57.7 in July from 62.2 in June. While any value over 50 does still represent an acceleration in output, the latest reading was the lowest since March and suggests the rising wave of coronavirus infections and resulting ‘pingdemic’ has started to stifle business activity.

Inflation views begin to diverge

While a majority of Bank of England (BoE) policymakers continue to expect current inflationary pressures to prove short-lived, some have voiced concerns that the recent leap in prices may require more immediate policy action.

Data released last month by ONS showed the Consumer Prices Index (CPI) 12-month rate – which compares prices in the current month with the same period a year earlier – rose to 2.5% in June, a sharp increase from May’s 2.1% figure. This was significantly above the consensus forecast in a Reuters poll of economists and the highest rate since August 2018.

ONS Deputy National Statistician, Jonathan Athow, said the rise was widespread, with price increases across a range of categories, including food, fuel, second-hand cars, clothing and footwear. He also acknowledged that “some of the increase is from temporary effects” and that much of the rise was “due to prices recovering from lows earlier in the pandemic“.

Survey evidence, though, does suggest the surge in inflationary pressures is set to continue. Preliminary data from July’s IHS Markit/CIPS PMI, for instance, reported input costs at an all-time high, with output charges rising at a near-record rate.

Over the past few weeks, most members of the BoE’s Monetary Policy Committee (MPC) have expressed a view on the likely future path of inflation. A majority still seem to feel that the recent jump in prices will prove temporary and that the Bank’s current monetary stimulus should therefore be maintained.

However, two members – Dave Ramsden and Michael Saunders – recently broke ranks, arguing that the time for tighter monetary policy may be nearing. Minutes from the next MPC meeting, along with updated economic forecasts, are due to be published on 5 August and will provide further insight into the committee’s thoughts on the future course of action.

Markets: (Data compiled by TOMD)

London stocks ended lower on July’s last day of trading, following a weak session in Asia, weighed down by travel shares and miners, amid concerns that rising global coronavirus infections could derail economic growth. Markets in Europe also slipped back at the end of the month, with continuing concerns over China’s regulatory crackdown on tech stocks overshadowing upbeat earnings reports.

Overall, the FTSE 100 made very little progress in July, ending the month on 7,032.30, a slight loss of 0.07%. The mid-cap FTSE 250 index, which is typically made up of UK-focused businesses, reached record highs during July, as COVID-19 restrictions eased and the economy picked up, to close on 22,934.83, a monthly gain of 2.50%. The Junior AIM index closed on 1,251.11.

The Euro Stoxx 50 gained 0.62% in the month to end on 4,089.30. In Japan, the Nikkei 225 lost 5.24% as spiking COVID-19 cases, the crackdown by China on its technology sector, and mixed earnings from a range of companies reduced investor sentiment.

In the US, the Dow Jones ended July up 1.25% to close on 34,935.47, despite weaker than expected earnings results from heavily weighted companies including Amazon. The NASDAQ recorded a gain of 1.16%.

On the foreign exchanges, sterling closed the month at $1.39 against the US dollar. The euro closed at €1.17 against sterling and at $1.18 against the US dollar.

Gold is currently trading at around $1,813 a troy ounce, a gain of 2.51% on the month, having dropped back from a monthly high of over $1,829 on 15 July. Oil producing nations have agreed to increase output from August, with the aim of reducing prices and easing pressure on the global economy. Brent Crude is currently trading at around $75 per barrel, a gain of 0.57% on the month.

Index	Value (30/07/21)	% Movement (since 30/06/21)
FTSE 100	7,032.30	0.07%
FTSE 250	22,934.83	2.50%
FTSE AIM	1,251.11	0.22%
EURO STOXX 50	4,089.30	0.62%
NASDAQ Composite	14,672.68	1.16%
DOW JONES	34,935.47	1.25%
NIKKEI 225	27,283.59	5.24%

Labour market recovery continues

The latest set of employment statistics show the labour market continues to recover, with the number of employees on company payrolls growing by the largest amount since the start of the pandemic.

According to tax data, the number of people in payrolled employment rose by 356,000 in June, boosted by strong growth across both the food and accommodation sectors. While the data did show total UK employment remains below pre-pandemic levels, in some parts of the country – the North East, North West, East Midlands and Northern Ireland – payroll numbers have now actually risen beyond their pre-COVID levels.

The number of job vacancies is also now higher than before the pandemic struck. In the three months to June, there were 862,000 jobs on offer, 77,500 more than in the January to March 2020 period. Perhaps unsurprisingly, the recent increase was largely driven by rising vacancies within the hospitality and retail sectors.

Commenting on the figures, ONS Director of Economic Statistics Darren Morgan said, “The labour market is continuing to recover, with the number of employees on payroll up again strongly in June. However, it is still over 200,000 down on pre-pandemic levels, while a large number of workers remain on furlough.“

Euro 2020 buoys retail sales

Official statistics have revealed that strong demand for food boosted retail sales in June, while more recent survey evidence suggests sales volumes remain at relatively healthy levels.

According to ONS data, sales volumes rose by 0.5% in June, with the food sector the principal contributor to growth. In total, sales at food shops rose by 4.2%, as football fans stocked up on food and drink to enjoy at home during Euro 2020. In contrast, sales at non-food shops fell, with furniture and clothing demand particularly weak.

Data from the latest Distributive Trades Survey, published by the Confederation of British Industry (CBI) suggests a slight dip in sales last month, with the net balance figure falling from a near three-year high of +25 in June to +23 in July. Retailers also said they expect sales to remain broadly in line with seasonal norms in August.

Commenting on the findings, CBI Principal Economist, Ben Jones, said, “Consumer demand continues to support the UK’s economic recovery. Retail sales have been at or above seasonal norms for the last four months now, although this picture is not universal, with the clothing and footwear stores in particular yet to see demand recover to usual levels.“

It is important to take professional advice before making any decision relating to your personal finances. Information within this document is based on our current understanding and can be subject to change without notice and the accuracy and completeness of the information cannot be guaranteed. It does not provide individual tailored investment advice and is for guidance only. Some rules may vary in different parts of the UK. We cannot assume legal liability for any errors or omissions it might contain. Levels and bases of, and reliefs from, taxation are those currently applying or proposed and are subject to change; their value depends on the individual circumstances of the investor. No part of this document may be reproduced in any manner without prior permission.

News in Review

‘It’s time we recognised the quality that other countries see in the UK’

In an open letter to UK institutional investors last week, Boris Johnson and Rishi Sunak urged pension schemes to invest more of savers’ money into UK assets, to help drive the economic recovery and boost long-term growth prospects. They believe the country needs an ‘investment big bang’ to unlock ‘hundreds of billions of pounds’ sat in schemes, and that UK institutional investors should invest a greater proportion of their capital in UK assets, such as infrastructure and pioneering firms.

In the letter, which comes ahead of an Investment Summit at Downing Street in October, Sunak and Johnson highlighted that UK investors are currently under-represented in owning these assets, whilst some of the world’s largest pension funds, including from Australia and Canada, have benefited from the opportunities that UK long-term investments afford.They wrote, ‘It’s time we recognised the quality that other countries see in the UK, and back ourselves by investing more money into the companies and infrastructure that will drive growth and prosperity across our country… we want to see UK pension savers benefiting from the fruits of UK ingenuity and enterprise, being given the opportunity to back British success stories, and secure higher returns and better retirements.’

MPC maintain policy

Last Thursday, the Bank of England’s Monetary Policy Committee (MPC) voted in favour of maintaining monetary policy, keeping Bank Rate unchanged at 0.1% and bond buying at current levels. Just one member of the eight-person Committee, voted to end the bond buying programme early.

In his accompanying economic outlook, Governor of the Bank of England, Andrew Bailey, spoke about the big news story – inflation. The Bank expects inflation to peak at 4% in Q4 and Q1 2022, before falling back to around 2.5% at the end of next year, returning to target in H2 2023. The prices of traded goods have contributed to the surge in inflation, reflecting several developments including oil prices, supply bottlenecks and a global upturn in the prices of basic commodities. Bailey concluded, “The MPC’s view is that there are good reasons to suggest that above-target inflation will be temporary. But if this outlook appears to be in jeopardy, the MPC will not hesitate to act.”

The Bank expects UK GDP to have risen ‘slightly’ faster than expected in Q2, offset by slowing momentum in Q3, ‘as suggested by higher-frequency indicators of card spending, consumer confidence and mobility, which have either levelled off or fallen slightly in recent weeks.’ Consequently, UK GDP is still expected to grow by 7.25% this year, followed by growth of 6% next year.

Sterling extends gains against euro

In recent weeks, sterling has performed strongly, as confidence gathers surrounding high vaccination rates, easing restrictions and although still elevated, declining virus cases. On Tuesday, sterling extended gains to hit its strongest level against the euro since February last year.

US indices reach highs on positive jobs data

Across the pond, better than expected jobs data boosted markets at the end of last week. The labour market in the world’s largest economy remains firmly in recovery mode, registering the seventh consecutive month of jobs expansion. Nonfarm payroll employment rose by 943,000 in July, far outstripping the 870,000 jobs expected in a Reuters survey of economists. The unemployment rate dipped to 5.4% from 5.9%, also beating the median estimate of 5.7%. On Tuesday, the Senate voted to approve a $1trn infrastructure bill.

Cautious optimism for home markets

At home, cautious optimism appears to be outweighing concern about rising Delta variant rates in Asia and to a lesser extent in the US, resulting in another record high for the domestically focused FTSE 250.

China’s export growth slows

New coronavirus infections in July have resulted in authorities in many Chinese cities imposing lockdown on affected communities, ordering millions to be tested and suspending some business activity, including factory work. This has resulted in an unexpected slowdown in export growth – exports in July rose 19.3% year-on-year, compared to a 32.2% gain in June – analysts polled by Reuters had forecast a gain of 20.8% for the month.

Here to help

Financial advice is key, so please do not hesitate to get in contact with any questions or concerns you may have.

The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated.

News in Review

“Our economy is rebounding faster than initially expected”

Last week saw the International Monetary Fund (IMF) release its latest assessment of the global economy. Among the headline stories was a sharp increase to this year’s UK growth forecast, with the renowned international soothsayer now predicting a 7% expansion – 1.7 percentage points higher than its previous projection published in April. This uplift was attributed to stronger than expected growth between February and April, due to the success of the UK vaccination programme and furlough scheme. Responding to the upgrade, Chancellor Rishi Sunak said, “There are positive signs that our economy is rebounding faster than initially expected.”

Along with the US, the UK rate was the joint-highest among the major advanced economies. In total, growth across all rich nations is forecast to be half a percentage point above April’s prediction. However, the latest IMF assessment did highlight a worrying divergence in fortunes between rich and poor countries due to differing levels of access to COVID vaccines. As a result, the overall global growth forecast for 2021 remains unchanged at 6%, with a weaker outlook for many emerging market and developing economies offsetting gains across richer nations.

US growth below expectations

While the US economy is expected to witness strong growth this year, the latest gross domestic product (GDP) figures released last Thursday fell short of market expectations. According to the Commerce Department’s advance estimate, the US economy grew at an annualised rate of 6.5% in the second quarter. This was only slightly above the rate recorded in the first three months of the year and significantly below the consensus forecast of 8.5%. It did, however, move US output back above its pre-pandemic level for the first time since COVID struck.

Eurozone growth rebounds

GDP data published on Friday also showed the eurozone economy has pulled out of its pandemic-induced recession, with an initial second quarter growth estimate of 2%. This figure, which was better than economists predicted, was buoyed by a particularly strong performance from the bloc’s third and fourth largest economies, Italy and Spain, which posted quarterly growth rates of 2.7% and 2.8%, respectively. Despite the second quarter rise, the eurozone economy remains 3% smaller than its pre-pandemic peak. The first estimate of UK second quarter GDP is due for release on 12 August.

Eurozone and US inflation up

During the past seven days, both the eurozone and US statistics agencies published new inflation data. In the eurozone, an early official estimate suggests annual inflation rose to 2.2% in July from 1.9% in June. This was 0.2 percentage points above market expectations and the highest rate since October 2018; it also moved inflation above the European Central Bank’s 2% target.

In the US, the Federal Reserve’s preferred inflation measure (core PCE) rose to 3.5% in the 12 months to June, from 3.4% in May. While this leaves the rate well above the central bank’s 2% target, it was actually 0.2 percentage points below analysts’ expectations. A day prior to the inflation data release, the Fed announced its current monetary policy stance would remain unchanged, with Fed Chair, Jerome Powell, reiterating his view that higher prices were the result of “transitory factors” and therefore not an imminent risk to the US economy.

Furlough numbers fall

Official figures published last Thursday showed the number of people on furlough at the end of June stood at 1.9 million, more than half a million fewer than at the end of May. The news came three days before the next phase of furlough tapering was introduced, with employers having to contribute 20% towards employee salaries from 1 August. Research published by the British Chambers of Commerce on Monday suggests nearly one in five firms are considering staff redundancies in response to the furlough change.

Housing market cools

The latest Nationwide House Price Index, released last Wednesday, revealed that annual house price growth slowed to 10.5% in the year to July, down from a 17-year high of 13.4% in the previous month.

Stocks rally

After having been hit by concerns over China’s tech crackdown last week, London stocks rallied at the start of the week; the FTSE 100 rose to a three-week high on Tuesday afternoon, continuing its strong start to August, whilst the domestically focused FTSE 250 reached another record high.

Here to help

Financial advice is key, so please do not hesitate to get in contact with any questions or concerns you may have.

In the news – Money

Be wary of that holiday selfie

Now that many of us are able to make travel plans, remember to think twice before posting a holiday selfie on social media. Your insurer may consider this as telling people that you are away from home, leaving your property unoccupied and as a result, potentially invalidating or compromising your insurance cover. Unfortunately, more and more criminals are using social media posts to identify when a property might be empty.

Sustainable funds – a new record

Data from industry tracker Morningstar shows that 2021 started with continued European interest in sustainable funds, attracting all-time high inflows of €120bn in Q1, 18% higher than the previous quarter. Climate funds proved to be top of the preferred list, with six of them featuring in the top 10. The number of sustainable funds available continues to grow; 111 new sustainable funds launched in Q1.

Jabbed population are financially optimistic

Those who have already received their COVID-19 vaccination are reported to be more optimistic about their finances than those who are yet to have their jab¹. As well as giving people a feeling that the worst of the pandemic may be over, the jab also seems to be providing people with financial optimism about both investing and their own financial position. Nearly half (48%) of those who have had the vaccine believe now is a good time to invest, compared to 39% who have not yet received the jab.

¹Aegon, 2021

Lenders reassured by mortgage guarantee scheme

The government’s mortgage guarantee scheme, which launched in April 2021, is encouraging lenders to offer mortgage finance to buyers with smaller deposits. It has been welcome news for prospective home buyers.

The scheme works as follows. The government offers lenders a ‘guarantee’ on 95% LTV mortgages (i.e. those worth 95% of the property value, with a 5% deposit required from the buyer). The guarantee applies to the portion of the loan over 80%, with the government compensating the lender for a portion of the net losses suffered in the event of repossession.

To be eligible, you must:

• Be a first-time buyer or home mover

• Be buying a property to live in yourself

• Pass all normal affordability checks

• Be offered a mortgage between 91% and 95% LTV.

Get your foot on the ladder

Reassured by the guarantee, many high street lenders have now launched 95% mortgage deals. So, whether you’ve had to put your property dreams on hold during the pandemic or are just starting out on your homeownership journey, get in touch and we can assist you in getting the most suitable mortgage for your needs.

The scheme is due to end on 31 December 2022, subject to review.

As a mortgage is secured against your home or property, it could be repossessed if you do not keep up mortgage repayments. You may have to pay an early repayment charge to your existing lender if you remortgage.

Warm outside? Don’t forget about the LTA freeze

Summer, freedom and (hopefully) sunshine are all well on the way, but not planning for the Lifetime Allowance (LTA) freeze could cast a cloud over your finances.

For the next five years (until April 2026), the pension LTA will be held at its current level of £1,073,100. This means that the amount you can hold in your pension without incurring tax for withdrawals will remain static, even in the face of inflation. As a result, pension savers will likely need to consider other saving options over the next few years in order to avoid a tax bill. Tax is currently payable at 55% on everything over the limit if you take the money as a lump sum, or 25% if you take the money in another way, such as drawdown or through an annuity. As people continue to build up their pensions, the number approaching the LTA will increase as a result of the ‘big freeze’; so, you might wish to consider the various other options available to supplement your retirement savings.

The solution that suits you will be wholly dependent on your personal situation and circumstances. Consideration and planning are therefore important before you select the option that is right for you, particularly in light of the complexity of calculations around pensions and the LTA.

The value of investments and income from them may go down. You may not get back the original amount invested. A pension is a long-term investment. The fund value may fluctuate and can go down. Your eventual income may depend on the size of the fund at retirement, future interest rates and tax legislation.

In the news – Home Finance

How does your garden grow?

Since the pandemic hit the UK, Brits have been spending more time in their garden – and spending more on them, too. According to new research¹, 58% of respondents to a survey said their garden is now a bigger priority, which has been reflected in their spending. Almost a quarter of respondents (22%) spent more than £600 on their garden last year, compared with 12% in 2019. What’s more, over a quarter (27%) say they intend to spend over £600 in 2021.

The best return on your BTL investment

Buy-to-let (BTL) property can turn a real profit and provide a good income for landlords. Typically, UK BTL investors see a 5% annual return on average from their property – but profit is very much dependent on location. According to research, the top 10 places to invest in a rental property are: Sunderland, Blackburn, Durham, Blackpool, Oldham, Cleveland, Liverpool, Wigan, Bolton and Manchester.

Home moves prompted by nightmare neighbours

While the pandemic has prompted many people to move in search of more space, larger gardens or a more rural lifestyle, other people have less positive reasons for moving. According to a survey², 28% of those asked why they moved home cited a desire to move away from noisy or messy neighbours. It’s likely that neighbour frustrations annoyed us more than usual last year, due to the amount of time we spent at home.

¹Quickmovenow, 2021

²Yes,Homebuyers, 2021

Multi-jobbers take heed

Workers with more than one job, earning lower salaries, are at risk of a poorer retirement, as they miss out on employer pension contributions, a new study has found¹.

Under the auto enrolment scheme, employers are required to set up a pension and make contributions on their employees’ behalf, unless an employee decides to opt out. Employees need to earn at least £10,000 a year to be automatically enrolled. This is where the issue faced by multi-jobbers becomes clear, as no matter how much someone earns in total, they are excluded from auto enrolment where the individual job pays less than £10,000 p.a. This has been estimated to affect more than four million people in the UK.

Threshold confusion

Many workers are unaware that providing they have qualifying earnings above £6,240, they can choose to opt into their company’s pension scheme, with the employer legally required to contribute at a rate of 3% of their salary. Those earning under £6,240 can still opt into their company pension, but their employer is not required to contribute.

Worryingly, the study found that around one in 20 multi-jobbers, with at least one job paying under the £10,000 threshold, say they have been refused entry into a company pension by their bosses.

¹Scottish Widows, 2021

Residential Property Review – July 2021

Building Safety Bill published

Claiming “the biggest changes to building safety in nearly 40 years“, Housing Secretary, Robert Jenrick, said that the Building Safety Bill will set out a clear pathway for the future as to how residential buildings should be constructed and maintained.

The Bill was published on 5 July to set out new and more stringent requirements for residential buildings, following Dame Judith Hackitt’s review of building regulations and fire safety after the Grenfell Tower tragedy in 2017.

New measures include:

Identifying people responsible for safety during the design, build and occupation of a high-rise residential building
Establishing a Building Safety Regulator to hold to account those who break the rules and are not properly managing building safety risks, including taking enforcement action where needed
Giving residents more routes to raise concerns about safety, and mechanisms to ensure their concerns will be heard and taken seriously
Extending rights to compensation for substandard workmanship and unacceptable defect
Driving a culture change across the industry to enable the design and construction of high-quality, safe homes in the years to come.

Scarcity of new listings

In its latest UK Residential Market Survey, the Royal Institution of Chartered Surveyors (RICS) has indicated that new listings are becoming increasingly scarce.

The RICS Survey points to a continuing excess of demand over supply, with a net balance for new instructions of -34% (down from -24% in May) during June, which is a third consecutive monthly fall in new listings.

Knight Frank has also reported strong demand, with figures showing a ratio of new prospective buyers to new instructions to sell, being 10.4 in June, which is 56% above the five-year average.

James Cleland, Head of Knight Frank’s Country business commented, “Stock is still low but building. There will be a gradual restocking over July and August and good houses will sell well over the summer. It actually feels like we’re moving towards a better place as a rebalancing of the market is underway.“

Property prices in Scotland continue to rise

The property boom is continuing in Scotland – an annual growth figure of 12.1%, in the year to May 2021, has been recorded.

This is the highest increase in house prices in over a decade in Scotland and has occurred without the benefit of the Stamp Duty holiday, which has continued to offer buyers a significant discount elsewhere in the UK, fuelling the growth in house prices.

According to Savills, the average house price in Edinburgh rose to over £300,000 in May, for the first time. John Forsyth, a Director of Savills commented, “The sales market, particularly for family homes, has been very active in the first half of the year. Nearly 80% of the properties we have sold have attracted multiple bidders and premiums of up to 15% to 20% over valuations have been achieved by our Edinburgh city office. Our registered buyer inquiry levels were up 30% in June when compared with June 2019, which has resulted in more competition, particularly for family homes throughout the city.“

House Prices Headline statistics

House Price Index (May 2021)*

133.5*

Average House Price

£254,624

Monthly Change

0.9%

Annual Change

10.0%

*(Jan 2015 = 100)

Average house prices in the UK increased by 10% in the year to May 2021
On a non-seasonally adjusted basis, average house prices in the UK decreased by 0.9% between April and May 2021
House price growth was strongest in the North West where prices increased by 15.2% in the year to May 2021.

House Prices Price change by region

Region	Monthly Change (%)	Annual Change (%)	Average Price (£)
England	0.4	9.7	£271,434
Northern Ireland (Quarter 1 – 2021)	1.1	6.0	£149,178
Scotland	5.4	12.1	£171,448
Wales	0.8	13.3	£184,297
East Midlands	-0.2	11.0	£216,077
East of England	-1.0	6.9	£310,200
London	-0.7	5.2	£497,948
North East	1.4	11.8	£143,129
North West	1.4	15.2	£189,245
South East	1.4	9.1	£350,016
South West	-0.6	8.4	£277,603
West Midlands Region	0.8	9.8	£219,793
Yorkshire & The Humber	0.8	10.2	£181,856

Source: The Land Registry
Release date: 14/07/21 Next date release: 18/08/21

Average monthly price by property type – May 2021

Property Type	Annual Increase
Detached £391,656	11.3%
Semi-detached £242,634	9.8%
Terraced £208,810	11.4%
Flat / maisonette £215,731	6.5%

Source: The Land Registry
Release date: 14/07/21

Residential market outlook

“The total stock of homes for sale continues to run well below historical norms, and this will underpin pricing. At the same time, it may also constrain potential activity, especially for buyers looking for family houses. Even so, we forecast that this year will be one of the busiest for the housing market since the global financial crisis.“

Grainne Gilmore, Head of Research at Zoopla
Source Zoopla June 2021

All details are correct at the time of writing (20 July 2021)

Commercial Property Market Review – July 2021

Moratorium on commercial evictions extended

The government has announced an extension to the moratorium on commercial eviction due to rent arrears until 25 March 2022.

The scheme has been extended to give hospitality businesses and nightclubs, which have operated under restrictions for the entirety of the pandemic, and which came under increasing pressure when the planned 21 June date for lockdown easing was delayed, the breathing space they need to recover from the pandemic and to protect jobs. Housing Secretary Robert Jenrick has also announced that new legislation will be introduced to ringfence unpaid rent accumulated during periods of business closure, with landlords expected to make allowances for ringfenced arrears and to share the financial impact with their tenants.

The purpose of the legislation is to encourage landlords and tenants to work together to come to a mutual agreement about how the rent arrears will be repaid. If an agreement cannot be reached, the new legislation will ensure that the parties arrive at a legally binding agreement via an arbitration process.

In order to protect landlords, however, the government has stipulated that tenants who are able to pay their rent, must do so, and those who are currently unable must start paying as soon as restrictions change or they are given the green light to open.

The ban on statutory demands and winding-up petitions has also been extended for a further three months and will now end on 30 September 2021.

Logistics sector goes from strength to strength

Online retail is a prime contributor to the continued health of the logistics sector, as more warehouse space is needed to house operations and goods for dispatch. Estimates suggest that 37% of all retail sales will be online by 2025, an increase from 20% prior to the pandemic.

The latest ‘Big Shed Briefing’ from Savills, outlines that over the next couple of years, the main issue will be warehouse supply, ‘The availability of construction materials will mean that the pace of delivery for new speculative supply will not be able to keep up with demand.’

From a take-up perspective, over 24m sq. ft of warehouse space has been transacted in H1 2021, setting a new record, a massive 82% in excess of the long-term H1 average of 13.4m sq. ft. Fuelled by online retailers taking more compact parcel delivery type units, demand for premises between 100,000 and 200,000 sq. ft has increased, accounting for 36% of the market, up from 27% last year. With supply plummeting at its quickest pace ever and now totalling 25.08m sq. ft, Savills conclude, ‘This fall in supply means that, at a nationwide level, vacancy now stands at 4.37%, the lowest level since Savills started recording the metric, and a fall of 221 bps in 12 months. Grade A supply now stands at 6.91m sq. ft, again the lowest level we have ever recorded.’

The availability of construction materials will mean that the pace of delivery for new speculative supply will not be able to keep up with demand

Commercial property currently for sale in the UK

Regions with the highest number of commercial properties for sale currently are South West and North West England
Northern Ireland currently has the lowest number of commercial properties for sale (25 properties)
There are currently 1,306 commercial properties for sale in London, the average asking price is £1,463,660.

Source: Zoopla, data extracted 20 July 2021

Region	No. properties	AVG. asking price
London	1,306	£1,463,660
South East England	1,183	£2,130,307
East Midlands	773	£967,639
East of England	728	£648,576
North East England	777	£349,957
North West England	1,433	£425,955
South West England	1,586	£537,683
West Midlands	1,171	£481,475
Yorkshire and The Humber	1,149	£327,864
Isle of Man	50	£461,187
Scotland	1,109	£302,368
Wales	765	£406,194
Northern Ireland	25	£408,205

Confidence in London offices

Despite the disruption caused by the pandemic, and some firms looking to reduce their space as firms adopt flexible working on a long-term basis, London’s office market has shown resilience. It has been reported that office property viewings are increasing, and property developers are reporting good demand for modern and environmentally friendly buildings.

Brookfield, Canadian real estate property manager and investment firm, has just completed on a 550,000 sq. ft office purchase in Fenchurch Street, totalling £635m, believed to be the largest City acquisition since the beginning of the pandemic.

With several properties in the capital and part-owner of the Canary Wharf Group, Brookfield were attracted to the purchase of 30 Fenchurch Street because of the transport links, including access to the Elizabeth Line, and strong occupancy levels. Other large lettings this year include PVH Corp agreeing a pre-let in White City and TikTok UK signing for a building in Farringdon.

Managing Partner and Head of European Real Estate at Brookfield, Brad Hyler, commented on the deal, “As a long-term investor in the City of London, we believe the City is an attractive investment market and we are excited to expand our portfolio… London remains the commercial centre of Europe and one of the world’s premier global gateway cities, and as such we see continued robust demand for premium, well-amenitized office space in prime locations with strong sustainability and wellness credentials.”

Head of London office brokerage team, at commercial real estate services and investment firm, CBRE, Rob Madden commented, “As lockdown eases, we are beginning to see a steady bounce back in office take-up, with occupiers typically willing to pay for the best available product in the market in order to win the war for talent.”

All details are correct at the time of writing (20 July 2021)