The Bank of England has held UK interest rates at a record low as gloomy retail news raises fears of a double-dip recession. At the same time the bank announced there will be no change in the level of quantitative easing –at least for the time being-as statistics point to a downturn in industrial output and stagnant growth. However, while a new recession would undoubtedly cause further hardship to businesses and consumers, it would provide businesses and commercial property investors with the opportunity of long-term rewards.
It comes as no surprise that the Bank of England has kept interest rates at 0.5%. Continuing economic bad news virtually assured that they would remain at the same record low we have seen since the spring of 2009. What is perhaps more surprising is that quantitative easing –measures taken to create new money to buy up Government debts and boost the economy, have also seen no change.
The Bank of England has introduced £200 billion pounds in quantitative easing since 2009 and has a further £75 billion to play with, up until February of this year. But with economic growth stagnant for the last three months of 2011 and worsening forecasts, many analysts had expected to see more money pumped into the economy. It was widely expected that this figure would be around £50 billion but while the bank appears to be playing a game of wait and see, analysts believe a further injection is inevitable.
Data from the Office for National Statistics shows industrial output falling, adding to fears that we may be heading back into recession. Analyst Samuel Tombs believes it is now a real prospect. He says; “These falls mean that overall production is now 3.5% below its recent peak set at the start of 2011 and some 12.5% below its pre-recession level.” Recent disappointing sales figures and profit warnings from many high street commercial properties have only added to these fears.
While some retailers report encouraging sales in the run up to Christmas, it has been suggested that this may have been a result of heavy discounting. Meanwhile others, such as Tesco, saw a year on year fall on the same period in 2010 which was itself a very difficult trading period for retail commercial properties.
Adding to this bleak outlook, unemployment is expected to rise to record levels during 2012 with figures showing that the private sector has been unable to take up the slack following public sector job losses. All of this together makes grim reading for anyone hoping that 2012 would bring better economic news.
However commercial property investors and businesses seeking new premises may find a little cheer among these grim forecasts. Research by Movehut shows that the best time to buy commercial property is during a recession. If investors and businesses have the money, then at this point they will find bargains and be able to secure prime location offices, and other commercial properties at easily affordable prices. This then provides the opportunity to either rent these properties while waiting for a change in market conditions, or to enjoy the benefits of the bargain your business has secured. So while a recession is bad news for the UK as a whole, it would provide opportunities within the commercial property market.
