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UK vote lifts clouds of uncertainty for firms
HOW Singapore will be affected by Britain's new Conservative government is still unclear, as the terms of the country's planned departure from the European Union remain unknown, despite Thursday's watershed general election, watchers said.
Still, some Singapore players with a footprint in the United Kingdom told The Business Times that their longer-term strategy stands unchanged.
DBS currency strategist Philip Wee told BT: "Foreign businesses hope that a strong Tory majority would spell the start of the end of political gridlock. . . a key uncertainty holding back investments."
The vote has been viewed as a mandate for Prime Minister Boris Johnson's vow to "get Brexit done", which Singapore Business Federation chief executive Ho Meng Kit noted "brings some amount of certainty" for firms. But business risks continue on the lack of a clear path to how the departure will be done, Mr Ho added.
Noting the importance of clarity on the Brexit process to "help our companies plan and execute their market strategies", Mr Ho, like other industry watchers, called for a way forward that will "lessen Brexit's impact on UK businesses and its trading partners".
With Britain a party to the EU-Singapore Free Trade Agreement, which kicked in on Nov 21, Mr Ho remarked: "We look forward to the UK and Singapore governments working together to ensure that the benefits of the agreement continue to apply to businesses in both countries post-Brexit."
The British Chamber of Commerce Singapore also said in a statement that as policymakers chart the UK's future, "consideration should be given to economic stability and the avoidance of market access barriers, which are critical as the country seeks to renegotiate terms with its key trading partners across the globe".
Yet City Developments Ltd (CDL) was upbeat on the fundamentals of the British economy, with a spokesman telling BT that the private rented sector "is driven fundamentally by domestic demand, and is expected to be insulated from the impact of Brexit".
Several Singapore developers have built up substantial exposure to British real estate, where Jon Neale, head of UK research and strategy at consultancy JLL, anticipates a pick-up in leasing and investment on renewed investor and business confidence.
The CDL spokesman echoed this view, remarking: "We expect the election results to bolster investor confidence and support the UK's economic recovery, as there has been pent-up investment demand from the local and international community."
Half of Centurion Corp's 20 student housing properties are in the UK, with the latest addition in Nottingham unveiled just this week. Calling the British market a core part of the business, CEO Kong Chee Min said the election outcome is unlikely to materially affect the group's long-term plans since "whether Brexit goes one way or the other, the demand for student education in the UK continues to be very strong", thus making student housing a resilient sector.
Similarly, a spokesman for Frasers Property - which is invested in British office and business space - said that the group is mindful of uncertainties involving ongoing Brexit negotiations and the post-Brexit period, but added that "we are long-term investors in the markets we are invested in".
Outside of property, BreadTalk Group founder George Quek had said in a BT interview in early October that "the business situation may become more difficult in terms of manpower" if curbs on European immigration are imposed, since Eastern Europeans make up a fair share of the staff at its restaurants in Britain - yet he maintained that he remained confident in Britain as an economic powerhouse.
Hartmut Issel, Asia-Pacific head of equity and credit at UBS, told BT that the election results are "likely to be a modest positive for global investors", while Singapore International Chamber of Commerce CEO Victor Mills said that "the logjam in the UK Parliament preventing progress on Brexit is now finally over".
Mr Mills acknowledged that there are still lingering fears of a "hard Brexit", but believes that such a rupture can be avoided if the UK reaches a trade deal with the EU by end-2020. "Much of the work for this trade deal has already been done by Mr Johnson's team and, especially, by his predecessor's team," he added, while DBS's Mr Wee noted that the UK and EU can still agree to extend the deadline.
But OCBC economist Howie Lee flagged the chances that Mr Johnson may walk away from trade talks if no agreement is reached next December.
"The risk of a 'no trade deal Brexit' remains, and there is still a lot of work to do," said Mr Lee, highlighting the key role of Bank of England policy.
Citi's Christian Schulz, who covers European economics, summed it up in a presentation as "short-term relief; long-term, problems remain".
He predicted "initial relief, growth bouncing in the first half of the year, then fading growth as we head to yet another Brexit deadline, and a recession in 2021 as the UK exits the single market and the customs union".
Association of Small and Medium Enterprises president Kurt Wee also sees the election outcome as a worrying sign of "an increasingly inward-looking global political climate" - a trend that he contrasted with Asean's commitment to increasing openness and connectivity, which he believes will benefit Singapore's small and medium-sized enterprises (SMEs).
With recovery on the way for the Chinese economy, "SMEs should continue to focus on the Asian long game whilst hunting for opportunities in other parts of the world", he said.