The voters of Bournemouth made their feelings on continued EU membership pretty clear in the referendum, voting 54% Leave, 46% Remain. A lot has changed since then. We’ve seen the occupants of 10 Downing Street change three times, Sterling’s value decline and fall, financial markets – including insurance – experience massive movements, leave deadlines come and go, and politicians’ stances on what is achievable change on almost daily basis.
But now with a new Brexiteer PM, a proudly pro-Leave cabinet, a looming – and apparently immovable – exit date of the 31st October, the Brexit saga looks set to end. But what does Leave mean for Bournemouth’s businesses and the wider region’s economy? What will happen to the local property market – for homes, holiday homes and Bournemouth’s landlords’ rental properties?
In this latest blog from Coversure Poole, Bournemouth’s leading business and property insurance broker, we’ll look at the evidence and see whether Brexit means boom or bust for Bournemouth…
Why Did Bournemouth Vote Leave?
If you were imagining a classic, wealthy Leave supporting area, Bournemouth wouldn’t be it. The over 65s make up nearly 25% of the population – a demographic who voted en-masse to regain control – and concerns over immigration was cited by a Bournemouth Echo poll as the second biggest reason for locals voting Leave. Bournemouth is also a Conservative stronghold having returned Tobias Elwood and Conor Burns as its MPs. A recent survey of Conservative party members revealed that – even after all the turmoil we have seen thus far – they were still massively in favour of leaving and would be happy to see the Union break up to achieve it. 59% even said they would be happy to see ‘significant damage’ done to the UK economy so long as we left.
Stark stuff that reveals the strength of local feeling, but what does Brexit – deal or no-deal – hold for the local economy? Let’s take a look at some of the sectors that will be affected.
Most outsiders think that Bournemouth is all about tourism, holiday homes and hospitality. Now while the town is great at all these things and they all contribute significantly to the local economy, the largest private employer is the American bank, J P Morgan. With over 4,000 employees at its Chaseside base and countless more jobs dependent on its employees, any threat to its future is a threat to Bournemouth’s future. And that, sadly, is what Brexit means.
Tobias Elwood has stated publicly that a no-deal exit could lead them to ‘think about departing Bournemouth.’ J P Morgan’s CEO Jamie Dimon said the company’s future in the UK would depend on the “passport” arrangement which allows banks to sell services throughout the E.U. If we see the recent hardening of attitudes continue and the UK leaving without a deal, then the consequences both locally and nationally could be severe.
And its not just those in the financial services sector that could be hit. The jolt of a no-deal would create turmoil on the currency markets with Sterling dropping like a stone as it did in the aftermath of the result’s announcement and a likely fall in the stock market. Such outcomes would affect everything from pensions to holidays. Even insurance quotes could be impacted. Many insurance companies are large multinational corporations and if they feel their financial positions are threatened then premiums could rise and they could become much more risk-averse.
No-deal Brexit: More Project Fear?
Of course, if the last three years have taught us anything it’s that Brexit has generated more scare stories than Stephen King. The recession, the emergency Budget, Frankfurt replacing London as the finance capital of Europe, none of these dire financial warnings have come to pass. The reality is that moving 4,000 employees – even for someone the size of J P Morgan – isn’t easy or desirable. A no-deal could well force their hands, but even in that situation it would take time; time that could be used to secure an arrangement with Europe on a different relationship. That’s the hope anyway.
Realistically, whatever your feelings on the EU, from the perspective of the pound in our pocket; let’s hope that a deal is achieved.
Tourism is big business in Bournemouth. According to the Council, in 2015 28.5m visitors contributed £1.8bn to the local economy helping it to provide 12% of local employment. Figures from Visit England suggest that 50% of all visits to UK coastal resorts are from EU nations – most notably Germany and France. So, what will happen when we leave? Two scenarios immediately present themselves:
1. Decline – a weak pound makes the UK as a whole an expensive destination for European travellers. There’s also the ‘sadness’ or ‘hostility’ toward the UK’s leaving that may deter further potential visitors who will look to other European destinations and, going with the long-term trend, favour city breaks instead.
2. Rise – what the 2015 tourist figures reveal is that domestic tourism actually accounts for more revenue nationally than that from overseas visitors. Domestic trippers spent £66bn versus £19bn by foreign visitors. They also noted a trend in domestic overnight trips in England and tourism is growing steadily across holiday, visiting friends and relatives (VFR) and business travel. This growth is set to continue and see a 3.8% increase by 2025. Assuming we have the sort of summers we’ve seen in 2018 and 2019 we could see this sector of the economy flourish. Since Brexit began, there’s been a fall in demand for European holidays and if visas were required post October 31st then that would likely make places like Bournemouth even more attractive.
Bournemouth’s Property Market
The value of our homes has become national obsession. In areas as lovely and desirable as Bournemouth and holiday home paradise Poole, we’ve seen the property market buck the national trend and keep on rising. From April 2018-2019 price growth was at 2.4% according to the Nationwide. The growth rate is slowing, however, and since April prices have slid 0.2% each month. Now while such declines can hardly be called a crash, they are indicative of the concerns many have over Brexit.
So, what does Brexit mean for the region’s property market? Again, this is very dependent on the sort of Brexit we get. If we leave in an orderly fashion with a deal then the omens are good. As business finally sees certainty so investment will be released, the likes of J P Morgan can stand their relocation plans down giving certainty to thousands of highly paid locals and property owners who’ve put moves on hold will feel free to go ahead. In short: the property good times can roll again.
A no-deal on the other hand could have serious effects. A disorderly exit on the 31st will prove a massive shock to the global markets – that’s something everyone seems to agree upon. In the short-term interest rates are likely to climb as Sterling dives again and international players like J P Morgan would need to consider their future given their passport access to the Single Market will expire on the 1st. Businesses large and small will be handed more uncertainty as the UK finds its feet in a new world and the property market is likely to fall as buyers dry up and mortgages become more expensive and harder to come by.
Longer-term thigs will recover – they always do – but the ride may be bumpier than crossing to Cherbourg in a January gale.
The clarion call of pro-Brexit politicians has always been that Britain is a trading nation and that there are nations queuing up to do deals. Australia, the US, Japan and South Korea have all made favourable noises regarding deals and in time these should become a reality. So how will local international traders fair come 1st November? Let’s look at this from Sunseeker’s perspective.
Sunseeker are arguably Poole’s most famous business and exports are key to their success. Recently – and in no small part helped by Sterling’s slump – they have returned to profit and have big plans for the future. A no-deal Brexit with its attendant currency devaluation could mean an even greater competitive advantage in places such as the US, Middle East and Far East, their key export markets.
As with so much with Brexit though, it’s not that simple. Tariffs, border movement problems, immigration restrictions and export delays are all possible things which could really hurt the business. Then there’s the potential global economic impact of a disorderly exit: bankers, financiers, investors and the like are likely to feel the turbulence most acutely – the same group who are Sunseeker customers.
Education and Communities
With over 20,000 students Bournemouth University is a major economic driver for the town. It has massively boosted the local rental property market and its faculty has attracted millions in research grants. The EU has been a significant contributor in this area giving it around 7M€, something that will go when we leave. Its no secret that universities across the UK are struggling for funding and while this won’t be a nail in its coffin, it won’t help matters.
In terms of community funding the whole of the South West has received millions from the EU as part of its aim to rejuvenate struggling areas. Between 2003 and 2013 the FP7 Programme pumped 644M€ into the South West, while its successor – Horizon 2020 – will pump in millions more.
As for agricultural subsidies, the government has been coy regarding what will happen after we leave. As Secretary of State at the Department for Environment, Food, Rural Affairs (DEFRA), Michael Gove pledged only to maintain subsidies for the time being and a changed system is going through parliament. Dorset is a farming county and the end of the Common Agricultural Policy (CAP) adds a further level of uncertainty. Equally it could free UK farmers to export under its own rules, find new markets and see imports decline. We shall see…
What Does the Future Hold?
With its buoyant property and second home property market, exposure to international finance and trade, proximity to the Continent and the support it has received from the EU, Brexit will have a massive impact on Bournemouth and the rest of Dorset. How radical that impact will be depends largely on the manner in which we leave. Leave with a deal and it could be business as usual – even more business as usual. Leave without a deal and the waters look a lot murkier, at least in the short-term. One thing that we can be sure of is that we will survive and thrive. That is just what we do.
Like Some Insurance Help?
If you’d like some more help getting the right insurance for your car, taxi or fleet then please get in touch. We’ll be happy to give the benefit of our experience, give you all the advice you need and we can also offer you a highly-competitive, no-obligation motor insurance quote. You can call the Coversure Poole team on (01202) 801 782 or email us by clicking here.