24 Apr 2017
Britain's two-year exit process from the European Union began on 29 March when UK Prime Minister Theresa May triggered Article 50. This unprecedented event raises many questions for the built environment sector at large, many of which will only be answered as negotiations develop.
Safeguarding the sector
It is impossible to speculate on the potential impact of Brexit on the built environment sector in continental Europe, as the outcome of the negotiations are still a long way from becoming known. What is clear is that much is at stake. The sector makes a significant enabling input to economic activity, growth and job creation and helps create vital, liveable towns and cities.
RICS is committed to ensuring that this contribution is not put at risk and, together with several other real estate associations across Europe, is supporting a set of key principles that we would urge both EU and UK representatives to consider as they pursue the negotiations for the UK’s departure from the EU. These include:
1. Securing the skills base
Professional services are at the heart of Europe’s economy and our future growth in this sector is dependent on our ability to import and export such services throughout Europe. The mutual recognition of qualifications and the development of common technical standards have reduced the barriers to cross-border services provision. These common approaches have also meant that European businesses can support best practice in environmental, financial and social standards. Maintaining access and developing talent are critical to ensure the growth and competitiveness of the sector, and as the industry’s professional body, RICS is committed to driving the talent pipeline in our sector forward.
2. Avoiding new barriers
A future relationship between the UK and the EU must preserve the flow of skills, capital and investment between the two, and indeed around the world. We appreciate that political and other factors will play a role, but it is critically important that as few new barriers as possible are created because of the UK’s exit from the EU.
3. Protection of legitimate expectations and rights acquired
Provision should be made for a legal framework that protects the interests of long term investors in the EU and UK. Drastic or sudden changes in the existing legislation should be avoided because of the long-term nature of real estate investments, as this may result in undesirable shock waves. This applies in particular to existing schemes such Alternative Investment Fund Managers Directive (AIFMD) and the Market in Financial Instruments Directive (MIFD). If the application of the principle of the free movement of capital is to be reduced for flows across the Channel, it is important that pre-existing rights, obligations and expectations are adequately protected.
"It is important for the European economy that the flow of skills and capital within the sector remains as unhindered as possible”
4. Maintaining market access
A legal framework that provides access to EU markets for long-term investors, fund managers and lenders in the UK and that allows those based in an EU Member State the same access to the UK market will be better for everyone. The framework should consider: the investment activities of long-term investors; supply of credit by banks and non-bank lenders; the marketing activities of fund managers as they raise funds; their managing activities, including investing and realising investments in real estate; and recruitment and retention of professionals and other workers by all parts of the industry.
5. Maintaining the momentum on existing initiatives
While it is inevitable that significant resources and attention will now have to be devoted to the renegotiation of the UK’s relationship with the EU, this must not be allowed to derail or delay policy initiatives designed to boost the built environment sector. Examples include the case for a Capital Markets Union (CMU), removing barriers to cross-border investment, the Construction 2020 initiative aimed to create a competitive European construction sector, and several initiatives related to energy efficiency and sustainable buildings.
6. A transparent and open process
It is imperative that we have the maximum possible clarity and certainty about the next steps. Markets do not like uncertainty. It is time for a clear roadmap to be agreed by the EU and the UK and communicated to stakeholders. This must include clarity regarding the scope of negotiations and provide for appropriate stakeholder involvement.
Next to these principles, RICS also sees the uncertainty in markets due to rise in populist policies, which currently imply protectionism, as one of the biggest risks for businesses across Europe. In line with our public interest responsibility, we will continue to follow the debate closely seeking to advise both EU and UK policy-makers to ensure the best possible outcome for the sector.
Impact of Brexit on RICS members
Brexit poses many important challenges for members of RICS many of whom, regardless of where they are based, have activities or investments on both sides of the Channel.
RICS is global organisation and represents a truly international profession. Our aim is, and will continue to be, to offer confidence to markets and clients across Europe. We are committed to the development and implementation of international standards in the sector to ensure a more transparent marketplace, increased public trust, stronger investor confidence, and improved market stability.
Our continental European office is based in Brussels, and in addition to our HQ in London, we have regional offices in New York, Sao Paulo, Dubai, New Delhi, Singapore, Hong Kong, Beijing, Tokyo and Sydney. In addition to this, we have offices and staff in several European countries, not to mention all the RICS professionals who are proactively engaged through e.g. national boards and working groups.
Brexit: what RICS will do
- Convene policy makers and leaders from industry to address macro stability issues, for example through the World Built Environment Forum.
- Lead on the understanding of risks for the built environment in an international context, and delivering approaches to mitigate them. RICS is at the forefront of efforts to develop and embed international standards for valuation and measurement for both construction and real estate. These standards contribute to market transparency, encourage investment, and are increasingly adhered to around the world.
- Continue to provide our members with the support and guidance needed to help clients mitigate market risks, with confidence that RICS professionals operate within an independently-led regulatory framework.
- Our public interest remit and global network of professionals allow us to speak with authority to national governments and the EU institutions. We provide data through our regular property and construction surveys, to inform policy-makers and markets.
Being an RICS member continues to be a guarantee of standards and a passport in global markets. Political and national boundaries are of course important but members will continue to benefit from an increased status, recognition, market advantage, knowledge and a global network.If you have any feedback or concerns regarding Brexit and how it may impact on your business activities, please contact us.
More info: Sander Scheurwater
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