Reasons to be cheerful

We all agree the Budget was bad for growth and full of missed opportunities, but it could have been worse. Tom Bill posted an excellent write up of the residential market implications here, and I have little to add.

Voters polled by YouGov said it was unfair rather than fair by a margin of 48% to 21%, which is the second-worst score recorded by the pollster since it began tracking post-Budget sentiment in 2010. 

But some people did like it: JP Morgan Chase chief executive Jamie Dimon, for example. Yesterday, the firm said it will build a 3 million square foot tower in Canary Wharf to house up to 12,000 staff. The prime minister’s business envoy Varun Chandra visited Dimon in New York last week to give assurances about the government’s business-friendly policies, the FT reports. The government had reportedly been considering raising levies on lenders before choosing other options. 

Goldman Sachs also appeared to like the Budget. The company said yesterday it will add 500 roles to its Birmingham office in the coming years, doubling its headcount. The move is part of a broader strategy to increase its activity in the UK. It has “several billion pounds ready to be committed” in areas such as artificial intelligence and digital infrastructure, according to the Bloomberg write up.

Bearing the fruits

The JP Morgan announcement is another validation of Canary Wharf Group's (CWG) strategy to reshape the estate into a vibrant mixed-use district. 

“We’ve done all these things that have taken time and effort to come online and now we’re bearing the fruits of that success,” CWG chief executive Shobi Khan told the Times.

“All the great cities in the world have a vibrant, mixed-use environment. If you’re a pureplay CBD [central business district], companies are not attracted to that.”

Quarterly leasing volumes in the Docklands and Stratford area that includes Canary Wharf are running 60.9% above the long-term quarterly average, according to Knight Frank figures. The vacancy rate now stands just 0.7 percentage points above the long-run average. 

Goldman's expansion also fits into a broader upswing in leasing activity in UK cities. Take-up across ten of the nation's key economic hubs reached 1.22m sq ft in Q3, up by almost a fifth on Q2, although that's still 6% below the five-year quarterly average. Take-up in Birmingham totalled 223,108 sq ft, double the level recorded in Q2.

Feeling comfortable

Some of the pledges that underpin the Chancellor's new expanded headroom of £22 billion stretch the limits of credibility. Her pledge to cut the rise in day-to-day departmental spending by 50% between 2028 and 2030 would involve “near heroic restraint”, the Institute for Fiscal Studies said following the announcement.

Nevertheless, investors appear largely convinced and gilt yields have remained mercifully stable since Wednesday. Vanguard, the US asset manager with about US$11 trillion of assets under management, said the Budget had cleared the path for it to purchase more government debt.

“We feel comfortable to come back to the UK market and add gilt exposure,” said Ales Koutny, head of international rates at Vanguard, told the FT. UK borrowing costs, which are the highest in the G7, should now begin to close the gap with those in other big economies, he added.

Stability will pave the way for another rate cut from the Bank of England in December. Investors now expect 64 basis points of easing by the end of 2026, slightly more than before the Budget, according to Bloomberg analysis. That will enable lenders to keep trimming mortgage rates, which should unleash some pent up demand and lead to a stronger spring selling season.

A pragmatic approach

The government's inconsistent policymaking and lethargic approach to averting a collapse in homebuilding in the capital have diverted attention from some of its more sensible decisions, particularly when it comes to planning.

Back in August 2024, I wrote about Buckinghamshire Council's decision to throw out an application by Marlow Film Studios for a £750 million development comprising almost 2 million square feet of soundstages, production offices and new workshops. Eight of the twelve councillors voted to reject that application, primarily due to the impact on the green belt and the implications for traffic.

The Secretary of State called in that decision for review, and it became a test-bed for the government's more pragmatic approach to the green belt. The site is designated as green belt, but it's also a former quarry and landfill adjacent to the A404. Opponents of the project say the site is "a valuable wildlife-rich habitat, supporting multiple protected and endangered species." The developers describe it as a "despoiled former landfill site," currently "unusable for domestic buildings or agriculture".

Well, the government approved the project on Wednesday, which is a good omen for other major infrastructure and housing projects that may face local opposition despite being planned on low quality land. However, the fact that it took this long shows there's still plenty of work to do.

In other news...

Global luxury real estate market sees Q3 slowdown, New York remains resilient (Housing Wire).