Shocked, stunned, uncertainty, volatility, worry, stay calm. These were the most used words on Friday after the vote to leave the EU. We listened and I checked, and by Sunday, we were hearing words such as short term / long term view, opportunity, adjustment, creativity. Over the coming weeks, I suspect we’ll hear paradigm shift flogged to death and ‘the new norm’ being the go to phrase.
In our sector, the key words will be business resilience, stabilisation, scenario testing, stay calm and social mission. Which all sounds quite familiar? And that’s because the discipline that the sector has been getting to grips with over the past few years, will hold the best governed organisations in good stead. Whilst many in our sector may not have really believed a Leave vote might happen, the testing that should have been undertaken as part of normal business planning is now just testing for real.
There are though some things that now need to be ramped up in your scenario planning, in what we know will be an uncertain time, for a short or long period. Some policy implications to watch out for.
Housing Markets and the cost of borrowing
The assumption is that there may, at the very least, be a short term negative impact on the house building sector and new supply. Certainly, the drop in the share prices of the major house builders reflects that sentiment. The million homes by 2020 must now be consigned to pipe dream status. The cost of borrowing may also increase in the short term. My colleague Jim Lashmar explores this in more detail in his contribution.
Universal credit and welfare reform
Most commentators believe that the debate on immigration played a significant role in the decision. The Ian Duncan Smith policy imperative for welfare reform will almost certainly be re-invigorated and accelerated. This will have implications for who the sector houses, on what terms and at what price.
It’s official. Scottish devolution is back on the table. London had a distinctly different position from the vast majority of the country, and will increasingly go its own way. Expect other large conurbations and cities to increase the pressure for further control of local budgets, including housing.
Where there is turbulence and instability, expect calm and assurance from the regulator. Just like the Bank of England, our regulator has prepared for the eventuality of Brexit. Their task will be to ensure that the most vulnerable associations do not undermine the overall investment confidence that there is in the sector. If UK PLC in the short term is significantly devalued, our regulator will want to ensure that the sector is not similarly impacted.
With these and other as yet unknown consequences, expect therefore a paradigm shift in the way that we do business, but quite a lot of business as usual as well: adapting , flexing, responding to changed circumstances. What the housing sector has always done.
Altair is available to support organisations through these uncharted and turbulent times.