The Bank of England’s agents’ summary on Brexit, housing and the living wage
The economic slowdown is set to continue right up until the EU referendum, the Bank of England's latest agents' summary has revealed.
The Bank's sprawling network of so-called agents are Threadneedle's streets eyes and ears on the ground of the real economy. They monitor local conditions, talk to businesses, and assess the general state of the nation, reporting back to the Old Lady's ivory towers.
Agents delve into everything from wages to property to manufacturing to sentiment. Like everything the Bank seems to be doing these days, the EU referendum was front-and-centre of their assessment, but they also provided plenty of useful updates on how the UK economy is performing.
Read more: Everything the Bank of England and IMF said about things that had nothing to do with the referendum
Unlike other official data from the Office for National Statistics (ONS) and the Bank's own Inflation Report, the agents' summary comes through in real-time – it refers to the month right now so can provide some useful clues as to the state of the economy.
Brexit
"There was some evidence of businesses delaying investment expenditure decisions on account of the uncertainty around the outcome of the EU referendum," the agents reported, as they also warned that "commercial real estate investment transactions had slowed markedly on a year ago in London."
The Bank's top brass have consistently read the slowdown in commercial property as a sign of delayed business investment ahead of the EU referendum.
Housing
Mortgage data from a host of organisations has pointed to a big spike in property transactions in March as landlords and investors rushed to beat the introduction of the three per cent stamp duty surcharge.
The Bank's agents confirmed that it was now becoming clear that the the volume of transactions in March has distorted the market.
"The pattern of housing market activity had been affected by the bringing forward of buy to let transactions ahead of the introduction of the rise in stamp duty," the summary said.
Read more: A tale of two cities – the winners and loses in the London housing market
The Bank also announced it would introduce new lending requirements on buy to let landlords to try and boost the stability of the sector. However, agents said that from speaking to mortgage providers, there was "a risk that some landlords did not fully appreciate the implications" of these new changes, along with the restrictions on interest relief coming in next year.
Turning to new homes, "expectations were generally for the current rate of growth of new building to be maintained. A number of constraints were said to be preventing stronger growth, most notably from skills shortages."
National living wage
The feet on the ground also reported that firms were being forced to pay more for staff, "following the introduction of the national living wage", as official unemployment and wage statistics out this morning showed wage growth edged to an annual growth rate of two per cent.
This suggests that wages are likely to go higher in the next few months in the official data as mandatory wage hikes feed through to the numbers.
The agents' summary added dryly: "Labour cost growth per employee had edged higher following the introduction of the living wage."
There was no discussion, however, about whether the living wage would lead to a direct hit on employment, although employment intentions for the next six months among services firms – thought to be more affected by the new living wage – dip slightly.