Brexit Fears Prompt International Businesses to Halt Investment in Britain



  • New figures show demand for UK commercial property among international investors stalls as referendum approaches.
  • Short term uncertainty contributes to falling international investment demand in central London.
  • Rental and capital value projections scaled back after 2015 announcement of EU referendum.
  • Only 6% of survey respondents say Brexit will have positive impact on commercial property sector.

Demand drops

RICS EU Referendum Paper which examines the pros and cons of the UK remaining and exiting Europe includes new survey data showing that there has been a steady easing in international demand for UK office, industrial and retail property  since the referendum was confirmed in Q2 2015.

The demand indicator among international investors for UK commercial property is now at its lowest level since RICS records began in 2014 with just 5% of members surveyed reporting increased interest from overseas companies over the last three months. This is a considerable drop from Q2 2015, when the figure was at 36%.

Uncertainty knocks confidence

Uncertainty caused by the EU referendum has been cited by 38% of RICS members working within the sector as the reason why major international retailers and other businesses have been nervous of investing in Britain.

Should Britain leave the EU, 43% of respondents felt that it would have a negative impact on the commercial property sector and only six per cent said a Brexit scenario would have a positive impact on the commercial property sector.

The EU Referendum Paper shows that a range of key industries from residential housing to construction and rural have been hit by short term uncertainty. However, across the board, in the longer term steady growth is still predicted across rural, land and built environment sectors.

In the event of Brexit, farmers will most likely lose access to the EU single market and CAP. The question that Government has yet to answer is how much of the current support system they would replace in such an event.

In terms of CAP transition, the EU Commissioner for Agriculture has suggested that the EU may well have a contract to support UK farmers until 2020. However, this would still mean that we would have to restructure UK land and farming businesses in the short to medium term.

While the strong gains seen in land prices over the last decade have come to an end, and some are now forecasting falls ahead, 70 per cent of our rural members feel that land would still remain a strong investment opportunity overall.

While there is no doubt that the majority of those working in rural sectors will be concerned around the possible withdrawal of CAP, quite uniquely, there is an anomaly in that forestry has benefitted from the uncertainty around the EU and the consequential weakening of the pound.

The second half of 2015 saw a strong GBP performance against the Euro, and this impacted on the competitiveness of UK domestic supplies due the better prices of imported timber. Continued uncertainty from a Brexit could weaken the pound, so we could see resurgence in the domestic timber market. This could lead to UK timber being an enticing investment option for those looking into the UK – maintaining jobs, output and value.

Gerard Smith, RICS Rural Chair

The RICS Royal Charter requires that the body serves the public’s interest and as such, it will not provide a steer on which way to vote. As such, the EU Referendum Paper, objectively examines various scenarios, but does not take the analysis to the next stage of a ‘stay or go’ conclusion.

Survey launch: Insights from industry leaders

Survey launch panellists included: Chair of the RICS London Regional Board and Global Managing Director, Christie & Co Chris Day; Andrew Haynard, UK Deputy Chairman, JLL; Job Baines, Partner, Hobart Partners; and Charles Ostroumoff, Director, Arca Property Risk Management.

The panellists presented a mix of different opinions on a post-Brexit scenario with the understanding that it would be “business as usual” were we to remain.


It was revealed that, anecdotally, a fair amount of deals being done currently have a Brexit-clause allowing investors or lenders to reconsider investments depending on outcomes. However, it was stressed that the UK property market is world leading in terms of its transparency and ease of access. Although other European cities are attractive, London would still remain strong.

Lessons learned

There was also a feeling that concerns about the market were overplayed. One panellist commented that “the UK is very strong — when it does slows down we get grumpy — we shouldn’t”. Moreover, there was a level of confidence in the regulatory environment, which has learned a lot from previous crashes. More precisely, it was pointed out that there was much more of a separation between different asset classes and regions when compared with the last cycle, meaning a more resilient market.

Property peak

There was also a general consensus that we’re approaching a peak of the property cycle, and so the referendum was a factor that has execrated the situation but was not the only factor effecting property prices.