On the 18th April 2017, PM Theresa May called a shock snap election. The early General Election will be held on 8th June, in just a few days’ time.
The result will undeniably have a significant impact on many different industries, with both May and Corbyn adopting contrasting stances on a number of key issues including the economy, business and education.
But what does the snap general election mean for the UK office market? Below are some of key factors that will impact the office market.
The election date
May calling a snap election for next month means that there will no longer be a General Election called for 2020, as was previously scheduled. A key advantage of having the General Election early is that it means the PM has significantly more time to prepare for when the UK reaches the nitty-gritty end of Brexit negotiations and can give it their full attention.
The office market has experienced a surge in takeups in a number of locations around the country including Aberdeen, Sheffield, Cardiff, Belfast and the South East region. For instance, in the first quarter of this year, the takeup for offices in Aberdeen was at its highest rate in over three years.
The UK office market will be hoping to maintain these positive takeup rates, however, the uncertainty shrouding the snap election will undoubtedly may make this more challenging.
On a positive note, the early election may deter large companies from making any major decisions about whether to stay in the UK, and cause them to postpone any major action until after the election to see how each party will approach Brexit negotiations.
We expect the commercial property market to slow slightly until the election result is announced, however it’s unlikely that the office market will observe a dramatic decline over the coming weeks.
A win for the Tories is expected to stabilise the market, whilst the effect of a Labour victory is more difficult to predict.
With regards to the highly contentious issue of the single market, Theresa May has stated that the UK “cannot possibly” remain in it. Corbyn however, has stressed the importance of retaining the benefits of being in the single market.
The Single Market allows European countries to trade freely across Europe by ensuring free movement of goods, services labour and capital. Being a member single market is hugely important for UK businesses as it gives them access to over 500 million customers and benefits such as reduced costs and eliminates tariffs completely.
Many large corporations including HSBC, QWC and Microsoft have already threatened to pull business from the UK and relocate in Europe, which could have a significantly damaging effect on the UK office market.
A number of senior figures in investment have predicted uncertainty in the short-term, but have expressed that a victory for Theresa May would be the preferred outcome for financial markets and investors.
In a recent Independent article, Investment Manager, Luke Bartholomew at Aberdeen Asset Management said “The election should hand Theresa May a much bigger mandate to stand up to the harder line, anti-EU backbenchers which currently hold a disproportionate sway over her party’s stance on Brexit. That would be welcomed by financial markets.”
This stance was reiterated by Trevor Greetham, head of multi asset at Royal London Asset Management, who remarked: “If Theresa May gets a significantly increased mandate it will strengthen the UK’s position in Brexit negotiations.”
It’s looking increasingly likely that the UK will have no choice but to leave the European Single Market, so ultimately it boils down to whether May or Corbyn will be able to negotiate the best Brexit deal for UK businesses. The election of a leader who fails to secure the confidence of large organisations could act as a forcible catalyst for big international corporations deciding to move out of the UK.
A clear government mandate
Holding a snap general election gives the winning party a chance to have a proper mandate to carry out their election pledges and implement their Brexit strategy, something that May has suggested that she currently lacks.
Having a strong leader with a larger majority in the House of Commons would allow for current bills to be passed swiftly and would create a calmer and more settled environment within Westminster.
This, in turn, would pave the way for new policies on land, property, construction and infrastructure to be proposed, which could have a positive impact on the UK office market.
A leader with a large majority would also (in theory) help to steady parliament, work to stabilise the UK economy which may encourage investors who have been put off by the uncertainty of Brexit, to reconsider investing in the UK Office Market.
Generally speaking, the UK office market depends heavily upon the success of businesses in order to keep occupation high. Favourable business rates are very important, which are more likely under May than with a Corbyn-led government.
However, May’s newly released Conservative manifesto has been been received with a distinctly lukewarm reception by UK business leaders, with one senior figure remarking that: ‘This is not a pro-business manifesto’.
There are concerns amongst UK companies that the Tory manifesto would cause a hike in upfront costs for businesses, increased regulation and huge levels of uncertainty, which could in turn, have a detrimental effect on the UK office market.
Labour’s manifesto meanwhile, was met with a mixed response. Whilst some of the UK’s most influential business groups welcomed Corbyn’s policies around investment and training, many were highly critical of Labour’s policies on tax and business regulations.
Executive Director of the British Chambers of Commerce, Dr Adam Marshall said: “Some of the Labour Party’s tax and regulatory proposals would dissuade enterprise, aspiration, and business growth – and need to be re-thought.”
However, Corbyn’s pledges to reinstate the lower small-business tax rate, and scrap quarterly business reporting for companies who make less than £85,000 could encourage an increase in the number of SMEs starting up and looking to invest in office premises in the next few years, if Corbyn is elected as PM.
The snap election has seen short term decisions put on hold – but after, as there will be a higher level of certainty for a longer period of time, we should see a higher level of confidence and with that businesses will plan for growth and need additional office space. Clearly this view depends on their being no surprises on the election outcome- but the outcome seems more certain than in previous general elections.
Paul Slinn is the managing director and founder of Flexioffices.