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UK And EU Reach Post-Brexit Trade Agreement

When the clock on St. Stephen's Tower shows 11pm on Friday 31 January, the UK will exit the EU.

The UK and the European Union have reached an agreement on a post-Brexit trade deal, bringing to an end years of uncertainty about the future relationship between the two parties, uncertainty that has caused UK real estate investment to fall in recent years. 

The pound rose by more than 1% against the dollar and euro on Wednesday on news of the potential for a deal. 

A deal was reached after stumbling blocks relating to fishing rights and rules regarding state aid for UK companies were overcome. The decision was announced in separate statements from 10 Downing Street and the European Commission on Thursday.

For the real estate industry, the deal provides clarity for the first time in several years about the trading relationship between the UK and EU. Uncertainty about that relationship has dampened investment into UK real estate. 

In 2019, when the UK and EU missed multiple deadlines to agree on whether there would be any kind of trade deal, UK investment dropped 19% compared to 2018, although the total invested was still £51B, according to CBRE.

In December 2019, the UK parliament eventually voted in favour of striking a deal with the EU, but in 2020 the terms of that agreement had to be thrashed out, and if the end of the year had passed without a settlement being reached, the UK would have begun trading with the world’s largest economic bloc and its biggest trading partner on World Trade Organisation rules, adding tariffs to multiple goods and services that previously crossed borders tariff-free.

The unpredictability of this situation has been overshadowed by the impact of the coronavirus, but as the deadline to agree to a deal drew closer, Brexit once again became headline news.

“Whilst Brexit remains an uncertainty, investment in the UK retains a degree of political risk for international buyers,” UBS said in a report in July. 

The hope for real estate now will be that businesses can plan their space requirements with more certainty about how Brexit will impact their real estate needs, and investors will have more clarity about the likely economic prospects of the UK, because they do not have to factor in the effect of new tariffs.

Related Topics: Brexit, Brexit trade deal