Last week, at our 2020Vision event, leading behavioural economist Roger Martin-Fagg gave his forecast for the year ahead.
Now Roger isn’t the only person to have a crystal ball, indeed if you haven’t made a prediction for 2020 you’re in quite an exclusive club, but Roger’s different. He gets it right. Six weeks ago he called a Conservative win with a healthy majority. This is the third election on the bounce where his prediction has come to fruition, as it also did with the Trump victory a few years ago, oh and the decline in UK retail sales and the reduction in output of manufactured goods in China… and much more.
So, if you weren’t there I’ll share his key points – and make a few suggestions for what you need to do as a consequence.
In summary, Roger feels that 2020 is going to be a good year – for some people, very good. However, there are some serious issues for 2021 onwards that you need to be mindful of. Here’s an extract from his presentation:
“2020 will be a good year, the current growth in money supply will increase and an 80 seat majority will give confidence resulting in increased velocity. I forecast real GDP will hit 2.2% by the end of 2020 but the new Governor of the Bank of England will be warning that interest rates need to rise as the inflation rate unexpectedly grows above 3%.
The money supply in October grew at 3.7%. This is close to the 4% we need for steady real growth at 2%. Following the election result, I expect to see 5% growth on money supply in the first quarter of 2020. This will finance a 2.2% growth in GDP with an inflation rate of 2.8%. The time it takes for new money to flow through the whole economy varies with the level of confidence: it can take up to two years. But I expect a significant upturn in velocity.
The best indicator will be monthly house sales. They are normally around 100,000 per month: we can expect 110,000 per month by April assuming the weather is normal for the time of year. There will be price recoveries in London and the SE and average selling prices will rise by 5% across the country.
The construction sector will be inundated by much needed new work as the capex buttons are pressed by finance directors. Banks will become more willing to lend.The so called Boris Bounce will happen.
What could possibly go wrong? The key to a continued expansion is how the UK Government chooses to manage its relations with the EU. If there is a cabinet reshuffle during which members of the ERG are demoted it will be a clear sign that Boris wants a soft Brexit. He will need this if he is to deliver his promise to the North. If we continue to match EU standards, recognise how important the EU market for services exports and promise to regulate financial services at EU standards then I anticipate a free trade deal on goods will be struck within 18 months and for our financial services sector equivalence will be granted. In most respects this will be business as usual. However if there is a move towards creating Singapore on Thames and a pivot to the USA then the Boris Bounce will deflate by the end of next year. My instinct is this will not happen.
For example the race to the bottom on Corporation Tax will not happen. Hopefully the ERG will become a knitting club in the House of Commons and fade into oblivion. The February or March budget will give some clear messages of the intended path which I expect to be old fashioned one nation Toryism which is defined as paternalistic approach recognising that society develops organically and Government should support change but not engineer it.
In conclusion 2020 will be a good year. Real GDP up 2.2% by year end, wage growth 4%, house price growth 5%, interest rates no change until November then a small uplift to 1%. Retail will enjoy more consistent monthly demand with volumes growing 3% and value 5% CPI inflation will creep up towards 3% by the end of the year. Sterling/dollar between $1.30 and $1.40 Sterling /Euro 1.20.”
In light of Roger’s predictions I’m encouraging our members to address three main areas.
1. Recruitment & Retention
There aren’t enough people, (make that enough of the right people), and demand is going to increase. I predict upwards pressure on remuneration as a consequence so it’s even more important than ever to make sure your salary and benefit packages are in line with the market and more, that you’re recognising and rewarding your most talented people. One of the best ways to do this (and yes I’m biased but I truly believe it to be so) is to invest in the development of talented individuals. That’s why we have a new, Future Leader Programme for 2020 specifically for managers and heads of departments – details here: www.propertyacademy.co.uk/futureleader
2. First Touch
Our 60,000 mystery shops over the last three years have highlighted how poor many agents are at responding to enquiries – between 12-20% of calls go unanswered and over half of all leads receive no response after 24 hours. This situation is likely to get worse as the number of enquiries increase. It’s so important to give a brilliant first impression and therefore proper systems are needed to be in place.
3. Competitive Advantage
At BlueSky New York next April, we’ll be looking at how to create a clear and compelling competitive advantage. In this respect we have meetings arranged with senior people at WeWork and Compass plus a masterclass from Jaynie Smith, author of an excellent book, “Creating Competitive Advantage”.
This is perhaps the most important of all the actions for 2020. I say this as I’m concerned an upturn in transaction numbers might cause agents to feel they don’t need to innovate and change, ie the upturn might temporarily mask the urgent need to adapt and upgrade their whole business. I’ll be working closely with our members next year to design a totally upgraded Customer Experience (we’re calling it CX4.0) and this might just be the most important work I’ve ever been involved with.
This is the final four-i for 2019 and I’d like to thank you for all the many comments, emails, posts on social media, etc.
Four-i will return on 6th January 2020 so, in the meantime, I wish you a very merry Christmas and all the best for an amazing 2020.
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