Leading Indicators | Election 2024: a Commercial real estate perspective
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Here we look at the European leading indicators in the world of economics.
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What we know
Rishi Sunak’s decision to call an election for the 4th of July may have been a surprise, but much is already clear.
Firstly, any lingering hopes of a June interest rate cut have evaporated, given the Bank of England’s understandable need to be seen as apolitical. The reality is that this was always going to be an outside chance, even in the aftermath of weaker economic data, such as last week’s damp retail sales numbers.
Secondly, history tells us that, in the long run, the colour of political power does not have a significant bearing on economic performance. Our analysis shows that the same is true for commercial real estate performance, at least in aggregate terms.
Of course, that isn’t to imply that policy won’t impact at the local market or asset level – far from it. For that reason, we will be keeping a close eye on manifesto pledges as they arise. Real estate will be a bigger consideration in this election than in any other in recent times.
A challenging place to start
Commentary on public finances will be under very close scrutiny, if not by every last voter, then certainly by markets. Any potential government will studiously avoid sounding profligate, lest they invoke memories of the disastrous mini-budget of September 2022, or worse, cause a further spike in government bond yields. But this means there will be limited scope for government spending increases. What’s more, with the cost-of-living crisis still fresh in voters’ minds, the temptation will be to fund any additional spending not by income taxes, but by those levied on business.
Key battlegrounds
What are the issues that voters care about, and how do they relate to commercial real estate? Polling from YouGov charts a significant change in attitudes over the past decade.
It’s no surprise to see that The Economy leads as the key concern over time. Immigration, while still a significant concern for voters, ranks lower than it did ten years ago. Despite the cost-of-living crisis, and the highest tax burden since the aftermath of the second world war, Tax does not feature in today’s top ten.
Housing, The Environment, and Defence, are all new entrants to the top ten of voter concerns, compared with ten years ago, and all have direct implications for real estate.
Keir Starmer’s Labour party has announced that sites for new towns would be unveiled by the end of a first year in office, drawing on private sector support for funding.
When making the call for a general election, Rishi Sunak played down environmental considerations. In contrast, the Labour party has, eventually settled on a £15bn plan to drive a low-carbon transition.
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