Published: 04 April 2017
Area of Law: Real Estate
We’re open for business and ready for growth
In one of the most significant weeks in recent years, global eyes were all trained on the UK. Ahead of the triggering of Article 50 last Wednesday, inward property investment was the topic of choice, as a large, high-profile contingent of Qatari dignitaries, businesses and investors were welcomed to a landmark inter-governmental event over two days in London and Birmingham. As the wheels began to turn in the process of leaving the EU, the UK property sector was confirming its status as a key player on a global scale.
Held at Birmingham’s International Conference Centre and hosted by the Department of International Trade (DIT) and Secretary of State, Liam Fox, the second day of the event was attended by Prime Minister Theresa May and the Prime Minister of Qatar, His Excellency Sheikh Abdullah Bin Nasser Al Thani. The focus of the event was investment opportunities spanning the UK`s regions. Among the opportunities flagged was Birmingham itself and the recently-launched portfolio of projects compiled by the ‘Midlands Engine for Growth’.
But can the UK regions succeed in attracting more inward investment to support their growth plans?
The answer is absolutely. The UK and Qatar share a strong and growing trade and investment relationship. In 2015, UK exports to Qatar totalled £2.6 billion representing an increase of 16% from 2014, while in the same year, Qatar exports to the UK doubled to reach £2.7 billion. Qatari investment in the UK is already extensive – its involvement in iconic schemes such as the Shard, the Olympic Village and Canary Wharf is estimated to be worth £35-40 billion. Property sector visionaries believe there could be scope to build on this by promoting projects in other parts of the UK. Qatar`s Finance Minister announced a further £5B investment into the UK during the conference.
How Brexit is impacting investment
Looming Brexit negotiations and global instability are causing overseas investors to seek security for their investments. If past experience is anything to go by, the strength of the UK legal system and its independent judiciary, combined with the pro-business agenda adopted by local planning teams such as those in Birmingham, could see levels of inward investment rise further in the year ahead
The Qatar-UK Business & Investment Forum provided an opportunity to showcase the UK’s commitment to delivering secure investment opportunities, which are capable of offering strong commercial returns in the longer term. The resounding message from delegates and speakers at the event was overwhelmingly positive: the UK as a whole is a great place to do business; where many local planners and policy makers (such as those in Birmingham) are committed to delivering growth regardless of Brexit-related uncertainties. This will be welcome reassurance to anyone thinking of investing in the UK.
The Midlands Engine
The Midlands Engine for Growth is aiming to build on the region’s strengths and grow its economy by £34 billion by 2030; creating around 300,000 additional jobs. To help further these goals, an impressive pitch book of development opportunities worth around £7 billion was officially launched at MIPIM earlier this month. With the Government’s support in hosting international trade missions and reaching out to investors, the region is demonstrating its commitment to powering up the local economy and inspiring a new age of post-Brexit prosperity.
Under the spotlight
Transport and infrastructure are two areas of particular focus, especially in and around Birmingham and the West Midlands. Encouraging investors to commit and buy early in the growth curve is of course important in getting the region off to a strong start and encouraging others to follow. However, in uncertain times, a safe investment is essential, which means experienced international investors will scrutinise opportunities carefully.
If proof were needed of the UK’s track record in providing robust real estate opportunities, its success in attracting a record number of investments by foreign investors in 2015-2016 should suffice. Many factors are responsible for this success, including the planning system, which determines 80% of applications within the required eight or 13 week period. Seasoned investors often like cities where planning controls are relatively tight: if they obtain consent for a high quality scheme, 1,001 cheap imitations are unlikely to spring up and swamp the market. This is particularly reassuring to early-stage investors who give their backing to major schemes.
The land registration scheme is another factor that demonstrates Britain’s ability to offer secure real estate investments. The Land Registry, which oversees assets worth more than £4 trillion, effectively guarantees legal titles. It also helps to foster a transparent market by publishing accessible price data.
Recent and ongoing reductions in corporation tax rates in the UK are also helping to create a favourable environment for investors. While recent changes to the tax regime have undermined the use of offshore companies to buy residential rental properties in the UK, it is still possible to secure property investments on favourable terms by buying in the name of an individual or a trust.
The responsiveness of the UK legal system also means it can flex to meet the needs of international investors. Last year, prominent supporters of Islamic Finance in the UK including the CEO of Al Rayan Bank, Sultan Choudhury, and Mohammed Saqub, a partner at Shakespeare Martineau, pointed out that proposed tax changes would inadvertently damage the growth of Islamic Finance. The tax authorities responded swiftly by changing the rules. Local legal teams also have experience in structuring investments to ensure compliance with both UK law and Islamic financing principles.
These assurances of security will be welcome to any investors seeking out profitable opportunities. In Birmingham, developments such as the 270ft Bloc Hotel in Hill Street, city centre mixed use projects at Smithfield and Curzon have already attracted significant attention. Additionally, the Government’s recent promotion of multiple housing tenures (e.g. build to rent) is creating exciting opportunities that offer stable long-term income and capital growth. Continued investment in connectivity and transport infrastructure is also expected to add significant value to commercial and residential projects in years to come.
Successful property investments are built on a foundation of security and current conditions in the UK are right. Set against the backdrop of Brexit, collaboration between, ministers, regional leaders, lawyers and other dealmakers will be key in ensuring that foreign investors are aware of the excellent opportunities coming their way across the UK.