For my next post, I thought I would write about the general economy. This is of interest to both Landlords and Tenants. The buying, selling, renting, leasing etc of Commercial property depends on a strong economy.
The recent news established that the economy contracted by 0.3% in the last quarter of 2012 (more than the 0.1% expected by the city bigwigs- who said they know everything or anything!). This was after the 1% growth delivered by the Olympics boost. Are we in recession yet? Are the horsemen of the apocolypse riding towards us? The simple answer- no. Could we be soon?- possibly.
A recession is defined as 'two consecutive quarters of negative growth.' Put simply- if the economy contracts again in the first quarter of this year we will be back in recession and up the proverbial (to put it nicely...).
All sections of the economy- manufacturing, construction and services have posted negative growth. The services data is particularly worrying as the services sector comprises three quarters of the economy!
We now know, from the Autumn statement, that George Osborne's sums are badly out and that the belt tightening will continue until (at least) 2017.
So what's the problem? Wages are lagging behind inflation (currently at 2.7%). Wages are being held down in both the private and public sector. Welfare is being cut. If people have less to spend then, simply, they will not spend. They won't buy lots of nice stuff in the shops. Shops won't make a profit. They won't expand and take on staff. They go bust and yes, you guessed it, the Landlord is left extending his/her begging bowl to the administrators. A rather Dickensian scene- 'please sir can I have some more rent?' (well OK not quite...)
This lack of consumer demand appears to be lost on politicians of all colours. No amount of tax cuts or stimulus spending can force companies and consumers to spend. I do not dispute the need for austerity or rather I do not quibble with the idea that tough decisions must be made. But as long, as consumers tighten their belts then the economy will not grow! A stagnating economy is of no use to your average Commercial Landlord who relies on tenants in its properties with a strong footfall and timely rent payments.
About time, for the sake of all Landlords, that our politicians woke up and smelt the coffee.
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