Good morning readers. It’s been a busy couple of days and I have been watching the new announcements very closely as they come through. I am sure that you will agree with me in feeling that the announcement from Boris on Sunday afternoon was, on the whole, not entirely clear and certainly left me feeling slightly confused about what the next steps would be.
However, since then, what a week we have seen wouldn’t you agree? The updates have continued this morning with an announcement from that the economy has shrunk by 2% in Q1; the biggest drop since 2008.
Over the past few days I have been getting quite a lot of feedback and thoughts from investors about the new announcements and thought that I would put together a short article to outline them for you. It would be interesting to hear what you think!
A phased re-opening of the economy
The government’s strategy is to begin a phased re-opening the economy in three steps. The timing of these steps are conditional on there not being an increase in cases and deaths. Step one begins today and it looks like all businesses will be able to re-open by the earliest 4th July provided that they have the right measures in place.
Step one begins today (13th May) and includes the following main points:
- Face coverings should be worn in enclosed places
- You may meet just ONE person from outside your household
- You may drive to open spaces irrespective of the distance
- You may travel to work if your workplace is open
- Avoid public transport where possible
Step two begins at the earliest 1st June and includes the following points:
- Phased return for nurseries and schools
- Hope all primary pupils to return before the summer
- Non-essential retail to open where safe
- Sport & cultural events may happen behind closed doors
- Measures to facilitate small weddings
Step three begins at the earliest 4th July and includes the following points:
- Re-opening of all businesses including hairdressers, beauty salons, pubs, hotels, places of worship and leisure facilities including cinemas
You will undoubtably be familiar with the diagram below that helps to illustrate these steps. I personally think that this re-opening is quite sensible, however some have commented that they feel it may be too much too soon. What do you think? It will certainly be interesting to see how things progress over the coming weeks and months.
Extension to the furlough scheme
In addition to a phased re-opening of businesses, the government announced an extension of the furlough scheme by four months to the end of October. The chancellor confirmed that wages will continue to be paid at 80% until the end of July and then from August there will be more ‘flexibility’ to the scheme.
This is one to watch as we do not know yet what this ‘flexibility’ will mean as there is expected to be some contribution from the employer required. I will update you further on this when more details are released later this month.
Whilst this is a positive move, it is concerning that there was no announcement of any extension of support for the self-employed, which lasts just three months and company directors still seem to have been overlooked. Perhaps this is something that we will see in the next couple of days; hopefully there will be pressure applied!
Estate agents allowed to re-open
The last point I wanted to make is that from today, estate agents are allowed to reopen. This is a very positive move as landlords are now free to let their properties with physical viewings taking place and tenants having the green light to move homes.
In particular, the advice permits members of the public to visit sales or lettings agencies, developers sales offices and show homes, view properties for sale or rent, prepare properties prior to moving in and to move home. In addition, agents and landlords are allowed to visit rental properties to prepare them for sale; this includes carrying out appraisals, valuations and photography.
Obviously the right measures must be in place for this to happen, however this is an extremely positive step for property investors. Whilst this may be the case for the market, we have seen lenders on the whole tighten their criteria and obtaining finance for new investments can be quite a challenge so there is quite a way to go yet!
So, what do you think to the announcements from the last few days and how the government will be able to keep funding measures? Perhaps we will see an increase in taxes or other costs to pay for them. Will we continue to make use of virtual viewings and has that changed the market for the foreseeable future as they have proved to be so incredibly helpful over the past weeks?
I think one thing the extension to the furlough scheme does indicate is that the government expect things not to return to normal for quite some time. It seems that it is expected to be the end of October at least.
I will be releasing further updates as new announcements are made and we all prepare for a ‘new normal. Stay safe and as usual, I am more than happy to provide any advice and guidance where you need it.