Macro Matters: implications for UK economy is Boris Johnson makes it to No. 10

A Boris Johnson victory in a general election would cause UK asset prices and the pound to fall, deVere Group’s CEO predicts, which would exacerbate the existing attraction of the UK commercial property sector among non-sterling-based investors.

The warning from Nigel Green, founder and chief executive of deVere Group comes following the publication of a ComRes poll in The Daily Telegraph that suggests that with Johnson as leader the Conservatives could be heading for a landslide at the next election with a majority of 140.

Johnson, the current frontrunner in the Conservative leadership contest, officially launches his campaign last week.

Green explains:

“UK asset prices and sterling will certainly fall on a Boris Johnson victory at a general election as he has made it quite clear that he would be willing to pull the UK out of the European Union with no deal in place. Should Mr Johnson go on to win a general election, especially with a clear majority, he will be emboldened in his approach to Brexit.”

A weak pound is, of course, a positive stimulus for foreign capital into the UK commercial property sector, a trend the market has benefited from since the EU referendum vote three years ago. However, sterling-based commercial property investors would likely continue to scale back new investments in Europe, due to their rising price, while some may even crystallise existing overseas portfolios to bank to currency bump.

Green continued:

“Mr Johnson’s no-deal relies on the idea that the absence of a deal on 31st Oct will -by default- mean a no deal Brexit. And that parliament and Brussels are both powerless to stop it. This suggests that the parliament vote against a no-deal a few months ago is limited to banning the government from making it a policy goal, but it can’t stop a no-deal through inaction.

“A likely fall in UK asset prices and the pound would not just be about his Brexit policy. He is also viewed by many as untrustworthy and lacking in consistency. During the past two years, the pound has been battered when it comes to its price against other currencies.

 “Arguably, the key issue for the UK, however, is that one of its biggest and most important sectors, financial services, will suffer from another knock to the pound. It will be hit because it is built on foreign investment that puts its faith in a strong pound.

“A Boris Johnson win at a general election- especially with a clear majority – can be expected to prompt a significant number of UK and international investors in UK assets to consider the overseas options available to them to build and safeguard their wealth.”

james.wallace@realassetmedia.com