Leading Indicators | A sign of what’s to come? The UK realigns with the EU on R&D
Discover key economic and financial metrics, and what to look out for in the week ahead.
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UK INNOVATION ON THE HORIZON?
The UK is set to rejoin Horizon, the EU's scientific research scheme, which permits scientists and institutions to receive grants from its £81bn fund. The UK will also rejoin Copernicus, the EU's £8bn Earth observation programme. This will keep UK scientists at the forefront of climate research and allow Britain's aerospace industry to bid for satellite contracts worth hundreds of millions of euros.
The UK Life Sciences sector will view this as a win. Accession to the EU programmes will likely bolster the UK and EU’s long held partnership in R&D, while contributing to growth and competitiveness in the sector, making the UK an even more attractive location for scientists and researchers. There is active demand for 2.2m sq ft of lab space in the Golden Triangle region of London, Oxford and Cambridge, however there is only 385,000 sq ft of available space, as at the end of Q2. With greater funding for the sector available, real estate pricing will remain well supported.
REAL ESTATE STOCK EXCHANGE TO WIND DOWN
After four years and just three companies listed, the real estate stock exchange IPSX (International Property Securities Exchange) is winding down its operations. The exchange aimed to democratise property investment, allowing investors to buy directly into CRE instead of buying into a company and their management systems. Meanwhile, landlords could list their real estate assets on IPSX as REITs, allowing them to raise capital from shareholders specifically on those assets and flexibility of ownership of those assets. The CEO of IPSX blamed the exchange’s failure on a succession of geopolitical and macroeconomic headwinds, including Brexit, parliamentary instability, Covid-19 and the Russia/Ukraine war all having implications for the market and the interest rate cycle. This represents the end of another experiment into alternative ways to inject liquidity into inherently illiquid real assets.
UK CRE OUTLOOK IMPROVES
The latest IPF Consensus Survey has revealed an improved outlook for rental growth in 2023. All Property rental value growth projections for 2023 have increased by +60bps, from +1.6% in May to +2.2% in August. With rental growth projections improving, this could be supportive of pricing in some sectors. Meanwhile, the All UK Property total return forecast for 2023 has been downgraded by -200bps to -0.5% in August, from +1.5% last forecast in May. For 2024, the All Property total return is expected to improve to +5.7%, albeit this is compared to forecasts of +7.1% in May.
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