If recent history has taught us one thing, it is that anyone prepared to make predictions in writing about what may happen during the course of a coming year is quite clearly leaving themselves open to a sizeable portion of ridicule and public humiliation when they inevitably get it completely wrong.
After all, who amongst us predicted Brexit, the Conservatives losing their parliamentary majority and having to do a deal to stay in government with the DUP, and Trump in the White House?
So on that basis, here then are my predictions for 2018…..
In general economic terms, we are all somewhat treading water whilst we wait and see what Brexit has in store. Whilst there is much public strutting by politicians on both sides, with the EU pushing for a ‘hard’ Brexit to discourage other member states from leaving, and our own ministers looking to soften any potential blows, the truth is we don’t know quite where we are, politically or economically.
The economic bells were pealing for doom when the decision to leave the EU was first made, and if we look at a fairly bleak scenario it is certainly true that if there is an economic slowdown along with a ‘brain drain’ of multi-nationals uprooting from London to mainland Europe, there will be a major blow to the prime property markets in London. Like it or not, there is inevitably a trickle-down effect from the Capital, and if the property market in London experiences a wobble and a downturn, I believe it could and most likely would adversely affect secondary property markets nationally. The level of uncertainty has certainly held back the decisions of developers to build on a purely speculative basis without an end occupier already signed up, so the potential downside of Brexit has already put the brakes on in some respects. I expect this to continue until we have a firm agreement in place.
However, none of the doomsday scenarios are by any means a given, and I along with many others I have spoken to, have been quite pleasantly surprised by the outlook and resilience of many UK businesses. It would be fair to say that looking back at 2017, it was a far better year than many of us had dared hope for. Yes there has been considerable uncertainty, but the wheels did not immediately fall off the economic bandwagon as many feared, and so business continued, and we all stoically got on with the job in hand, whist the uncertainty eventually became the new norm.
Against this background of just ‘getting on with it’ the economy continued to perform reasonably well, with GDP growing at 1.5%, Bank of England base rates still relatively stable at 0.5% ( the rise of .25% being the first for over a decade), unemployment at a 42 year low of 4.5%, and an inflation rate falling to 3% in December 2017. It is true though that these headline figures don’t paint the full picture, and there is speculation that there may be some slowdown over the next year or so, which I expect will be a bit more mixed.
It is also worth remembering that the whole principle of Brexit negotiations is that ‘nothing is agreed until it is all agreed’, so it is certainly possible that the agreement could fall at the last hurdle. I personally don’t see Brexit as being in the best interest of the UK, or of its future generations, but looking ahead I have to say I believe the chances of a deal being done are increasingly strong with each new round of negotiations, and there remains wishful thinking for, but diminishing chances of a second referendum.
On a more local level there remain plenty positives to draw. Marketing Derby have done a sterling job of promoting our thriving local economy, which in the third quarter of 2017 was the third best performing across the whole of the UK. It is fair to say Derby has for some time economically punched above its weight in relation to its size, helped in no small measure by its very strong high-tech and manufacturing economy, which in turn attracts higher wage earners to the city. I believe the continuing high profile success of multi-nationals such as Rolls-Royce, Toyota UK, and Bombardier plays a very significant part, and their willingness to invest in their Derby operations has not only had a direct effect in terms of their workforce, but also down into the supply chains that also operate locally and across the region.
I believe that the fact that these major blue chip businesses operate beyond the UK and EU economies and are prominent on the global stage certainly means Derby is better placed than many other cities to deal with the headwinds from Brexit, as it is less likely to be affected. This level of certainty, in an uncertain time, has helped drive new developments such as Derby Triangle (Pride Park II) and Infinity Park. Both of these involve a long term vision which will bring further employers and a high-tech workforce to the region. The potential upside of this has been shown by international developers such as Blom Construction, who we have been pleased to advise on their scheme for 122 apartments on Raynesway, which is deliberately designed for and targeted at Derby’s growing high-tech mobile workforce.
The provision of new office and industrial space will generate a trickle-down effect, with better quality secondary stock becoming available as occupiers take up brand new space, whilst older redundant office space will continue to be converted and redeveloped into residential use, such as the former council offices at Middleton House on St Mary’s Gate. Demand for city centre living is in no small part driven by Derby University, which continues to grow and the need for student living space in the city centre is a key driver of new development, particularly in areas such as Agard Street, where another proposed new scheme has just been designed by Simon Foote, DLP Consulting and Locus Consulting.
As I have said before, the provision of new student space, and conversion of old redundant offices to residential use, is I think one of the main success stories in waiting of Derby. More people living in the city centre will create a greater demand for services, and because Derby is so compact it will be able to provide a core of businesses which will specifically serve the city centre resident economy both in the daytime and the evening, creating a more vibrant environment. Watch this space.
In short then, I believe that whilst in broad terms there remains understandable uncertainty over the economic outlook, there also remain reasons to be positive. On a local level, I believe Derby remains better placed than most cities to both take advantage of global opportunities, and weather any economic downside of Brexit. On this last point at least, I remain confident I will not need to reassess my 2018 prediction in a year’s time!