Much has happened since my last Brexit forecast but I reckon that odds on the core Brexit outcomes might have remained remarkably stable. The ‘No Deal’ option has evaporated for the time being while according to hints in the weekend’s press, the odds on Mrs May’s deal, with extras cobbled together with Labour, have apparently tightened.

What we do know is that the Tories will be  wiped out at both European and local council elections and the Party will be all but exterminated in the former. Mrs May cannot afford for this to happen, but the Whip’s dire warnings and threats will not prevent the impending wholesale exodus to the Brexit Party. This is a cheap shot – voter’s lives are unlikely to be directly affected by Mr Farage’s 23 European MPs, but the continued existence of a viable Conservative Party would be put seriously at risk. The only outcome that can save Mrs May’s Tories is for the UK to leave the EU before May 23rd, quickly followed by her departure.

So why would Labour not just stand by and watch this happen? Mr Corbyn knows that the absence of a Brexit deal would almost inevitably lead to his party backing the Member’s Conference vote for a referendum,- ‘confirmatory’ or otherwise. Mr Corbyn, despite his own historical Euroscepticism would be unable to avoid his party campaigning to remain and thereby alienating the significant number of Labour constituencies that voted overwhelmingly to leave and removing any realistic possibility that he would be elected Prime Minister. The perceived wisdom is therefore that in order to succeed, any accommodation between the parties would need to tick all of Labour’s workers’ rights and environmental boxes and lock the UK into a form of customs union until the next election. There would then be another referendum, but this one would be called a General Election, and it would be here that the type of ongoing trading relationship between the UK and EU would be fought out. Bozzer vs Jezza, hard vs soft.

Both parties’ manifestos committed to ‘honouring’ the 2016 result and a further plebiscite that leads to the withdrawal of Article 50 could therefore spell trouble at the polls at the hands of Mr Farage in 2022. However this scenario leaves both parties with at least the chance to retain their monopoly as the dominant forces in UK politics while, without succumbing to the pressure for a second referendum, offering another opportunity for voters to decide which sort of Brexit they want at a General Election without the option of no Brexit cluttering the argument.

I could very quickly be proved wrong, but my new odds:

No Deal                                                0%

Mrs May’s Deal.                                 0%

May’s Deal + Tory/Labour fudge   40%

Second Referendum                        60%

So what are the likely effects of these outcomes for real estate investors? Even if Mrs May and Mr Corbyn do arrive at some compromise agreement, there is of course no guarantee that it would succeed in passing through the House, but let us assume that it does.

For City real estate investors much will depend on whether the Political Declaration promises to include financial services in any form of customs union. Given the exclusion of services from Mrs May’s agreement and the Labour Party’s attitude towards the sector, this seems unlikely.  However both outcomes could add a degree of certainty to other sectors of the UK economy although a second referendum would postpone any such benefit for several months until the outcome is  known. Much would also depend on the questions on any ballot. Any binding referendum which excludes a ‘hard’ Brexit would nevertheless remove one important element of uncertainty. If so, both outcomes could provide the economy with a ‘sugar-rush’. Decisions that have been shelved until the outlook for the UK’s trading relationship with Europe is clearer, could proceed, and the long term nature of property lease could make the commercial sectors particular beneficiaries. But there is a ‘but’. Mrs May’s departure and potential replacement with a committed Tory Brexiteer, together with the prospect of a General Election that could determine the hardness or softness of Brexit will inevitably temper any ‘certainty’ benefits, even from an agreed deal – remember this is the Withdrawal Agreement and the  non-binding Political Declaration is the only issue under discussion between the parties. It remains to be seen whether any such agreement could be binding on a future government. So ironically it could be a second referendum that provides the better backdrop for real estate investors – as long as the questions on the ballot paper include a soft Brexit and the withdrawal of Article 50. If a meaningful (‘hard’) Brexit without continued membership of a customs union remains a realistic possibility under either scenario, then I’m afraid that the absence of a certain Brexit outcome could remove or delay any economic ‘sugar-rush’, and will continue to make it difficult for many long term real estate investment or occupancy decisions to proceed.

One more fly in the ointment. When Brexit is resolved it is almost inevitable that the MPC will vote for further rises in the UK Base Rate. The prospect of this will steepen the yield curve and therefore the days of ultra-cheap long term finance for the real estate sectors could be numbered.