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Subdued housing market activity in the UK

Last Updated: December 03, 2018

United Kingdom house pricesHouse prices in UK are still rising, at least in nominal terms (i.e. not adjusted for inflation). But uncertainty over Brexit is clouding the market´s prospects.

For the fifth consecutive quarter, London saw a house price drop, declining by 0.7% (-3.1% inflation-adjusted) during the year to Q3 2018, with falls of up to 15% for some top-end central London properties. Despite these declines in the capital´s house prices, Nationwide´s Chief Economist Robert Gardner noted that London´s prices are "still more than 50% above their 2007 levels".

The average house price in the UK rose by 2.1% to £216,103 (US$ 279,227) during the year to Q3 2018, according to Nationwide - a slowdown from price increases of 2.2% in Q2 2018 and 2.5% in Q1 2018. However, when adjusted for inflation, house prices actually fell by 0.4% y-o-y.

The highest price rise was in Yorkshire and Humberside, with house prices rising by 5.8% during the year to Q3 2018. It was followed by East Midlands (4.8%), Northern Ireland (4.3%), West Midlands (4.2%), and North West (4.1%).

The Outer Metropolitan Area around London actually fell by 0.4%, while prices in the North dropped by 1.7%. Regions with weaker price rises also included the South West (1.9%), Scotland (2.2%), East Anglia (almost 3%).

In October 2018, national house price growth was at its lowest since May 2013 at 1.6% y-o-y, according to Nationwide´s recent report. Aside from economic uncertainty, respondents of the RICS´s UK Residential Market Survey in September 2018 also cited stock shortage, affordability constraints, and recent interest rate hikes as factors restraining the market. RICS´s survey respondents were pessimistic that sales activity will pick-up in the coming months.

"As we enter quarter four, the market remains suppressed, which is likely to continue into 2019. A deal on Brexit is required to give some certainty, which will then encourage investors and purchasers," said Richard Taylor of London´s Surveyors & Valuers.

The UK´s and particularly London´s previous dramatic house price rises were fuelled by four factors:

  • Immigration and population growth have been strong, especially in London.
  • Interest rates have been at record lows, with a large expansion of the money supply through "quantitative easing".
  • The City of London (London´s financial centre) continues to boom.
  • Construction activity remains weak (though this is less true of London).

House prices in the UK are expected to increase by around 1% in 2018, according to Gardner. Activity will likely pick-up if uncertainty clears, but for now weak economic activity, and affordability constraints, are dampening the housing market´s activity and price growth.

Raising housing supply and other reforms

To address supply shortages, the government spelt out housing market reforms in a housing white paper published in February 2017. Measures include:

  • Councils will be required to make up-to-date plans to meet housing demand;
  • The maximum time between planning permission and the start of building construction is to be lowered from three to two years;
  • Small and medium-sized developers are to be boosted through a £3 billion (US$ 3.94 billion) home building fund;
  • Upward extension of buildings in urban areas is to be encouraged;
  • A "Lifetime Individuals Savings Account (Lifetime ISA)" was introduced in April 2017. Potential homebuyers can save up to £4,000 (US$ 5,259) a year, and the government will add a 25% ´bonus´ (or a maximum of £1,000) every year, until the individual turns 50. However, the 25% bonus can only be accessible if the money is spent on: (1) individual´s first home; (2) if the individual is already 60 years old; (3) if the individual is terminally ill with less than 12 months to live;
  • Standard tenancies are to be made more ´family-friendly´ by raising the tenancy length to three years or more in new build homes;
  • Letting agents´ fees are banned.

The housing white paper also fleshed out details of the Starter Homes policy. Starter homes are only to be available to households with combined incomes below £80,000 (US$ 105,180), or £90,000 (US$ 118,327) in London. Starter homes must cost a minimum of 20% less than the market value, and maximum price after the discount will be £450,000 (US$ 591,637) in London and £250,000 (US$ 328,687) elsewhere.

Buyers of starter homes will need a mortgage. If the property is resold within 15 years, some of or all of the discount must be repaid. Also, the government has scrapped the requirement that new build sites must have at least 20% starter homes; instead, there is a "clear expectation" that at least 10% of newbuild sites shall be "affordable".

Housing Boom and Bust

UK property prices saw huge rises from 1996 to 2007:

  • Prices in London rose 289.1% (228.1% in real terms) during this period.
  • Prices in Northern Ireland rose by 393.2% from Q3 1996 to Q3 2007 (315.9% in real terms), the highest rise among all UK regions
  • Price increases in other regions during this period ranged from 187.9% (142.8% in real terms) for Scotland, to 245.5% (191.3% real) for the Outer Metropolitan Area.
  • The national index rose 240.9% (187.5% in real terms) over the same period (all figures from Nationwide).

United Kingdom average house prices

In early 2007 interest rates were raised, and lending conditions tightened. House price falls accelerated in H2-2008, due to the global financial meltdown. The biggest falls occurred in Northern Ireland where house prices fell by 39.2% (-41.9% real). House price falls in other regions ranged from 14.1% (-17.8% real) for Scotland, to 21.7% (-25.1% real) in East Anglia. London house prices fell by 19.8% (-23.3% in real terms).

London prices are now declining

The gap between London and the rest of UK is the widest it has ever been, both in cash and percentage terms, with the average London home worth 136% more than the average home elsewhere in the UK (In Q3 2018), and the average difference in price almost £270,000 (US$ 348,421), according to Nationwide. Although London prices have always been higher, the gap was less than 40% before 1995.

UK london home compared UK

The divergence accelerated sharply in the years after the financial and eurozone crises in 2008-2009. In Q3 2018, however, London prices fell by 0.7% y-o-y to an average of £468,544 (US$ 605,406) in comparison to the 2.4% price increase in the wider market, based on the figures from Nationwide.

The average house price in London is now 55% higher than at the peak in 2007 at £468,544 (US$ 605,406). Several other regions have higher property values than their 2007 peak prices:

  • Outer Metropolitan London is 40.9% up on 2007.
  • Outer South East is 29.9% up on 2007.
  • East Anglia is up by 24.4%.
  • South West is up by 20.1%.
  • East Midlands is up by 18.8%.
  • West Midlands is up by 15.5%.
  • Yorkshire and Humberside is up by 2.5%
  • North West is up by 2.2%.
  • Wales is up by 0.8%.

The remaining regions remain lower than their 2007 peak values. Northern Ireland had the weakest performance, with prices still 38.9% lower than at the 2007 peak.

Key rate increased to 0.75%

United Kingdom interest mortgages

The Bank of England (BoE) announced a rate hike in August 2018, raising its benchmark to its highest level since March 2009 at 0.75%. This was only the BoE´s second rate hike in ten years, the previous being the increase to 0.5% (from 0.25%) in November 2017.

"Today, employment is at a record high, there is very limited spare capacity, real wages are picking up and external price pressures are declining," said BoE Governor Mark Carney. As of October 2018, the UK´s inflation rate was 2.4%, slightly above the BoE´s 2% target.

In October 2018, average interest rates for types of mortgages with 75% loan to value (LTV) were:

  • 1.76% for 2-year fixed rate mortgages (FRMs)
  • 1.83% for 3-year FRMs
  • 2.07% for 5-year FRMs
  • 2.69% for 10-year FRMs
  • 4.39% for Standard Variable Rate mortgages

Mortgage market softening

UK lending approvals dwellings

Gross mortgage lending for the third quarter of 2018 was up by almost 3% from the previous year to £71.1 billion (US$ 91.8 billion), according to UK Finance, with increased lending to home remortgagers and first-time buyers.

However the mortgage market softened in September 2018. Loans to first-time buyers fell by 4.5% y-o-y, and loans to home movers fell by 8.4%. Mortgages for buy-to-let house purchases plunged by 18.8% y-o-y.

"Remortgaging for both residential and buy-to-let properties have levelled out after a period of strong growth," said UK Finance´s Director of Mortgages Jackie Bennett. “Buy-to-let home purchases have eased again in September, suggesting lending in this market remains subdued as a result of recent tax, regulatory and legislative changes.

UK property transactions

"Demand for house purchases for both first-time buyers and homemovers has also lessened, as affordability constraints continue to bear down on consumer demand for new loans particularly in London and the South East."

In 2017, the UK´s completed property transactions were at around 1,220,060, a decline by 1.2% from the previous year, but still among the highest levels since 2007.

The UK´s mortgage market has generally been weaker since the 2007 financial crisis. Cash transactions have been more resilient than purchases involving a mortgage, according to Nationwide. "This is because cash buyers were less impacted by the tightening in credit conditions," said Nationwide.

RESIDENTIAL PROPERTY TRANSACTION COMPLETIONS (£40,000 OR ABOVE)

NUMBER OF TRANSACTIONS ANNUAL CHANGE (%)
Jul-18 Aug-18 Sep-18 Jul-18 Aug-18 Sep-18
England 87,340 99,940 80,750 -2.9 4.5 -11.3
Scotland 7,790 8,470 8,660 -13.2 -11.4 -11.4
Wales 4,830 5,460 3,910 3.0 5.8 -21.8
Northern Ireland 2,280 2,840 2,120 12.3 15.4 -16.2
UK 102,240 116,710 95,440 -3.2 3.4 -11.9
Source: HM Revenue & Customs

Challenges facing the UK housing market

Aside from the sluggish growth of household incomes and the ongoing political uncertainty, three other factors are also slowing the UK housing market:

[1] Effects of greatly increased stamp duties

UK Stamp Duty rates have been sharply ramped up in recent years. In April 2016, Stamp Duty rates on buy-to-let transactions increased very significantly - greatly dampening activity.

In April 2010 a new 5% Stamp Duty rate was introduced on homes over £1 million. In March 2012, 6% Stamp Duty was introduced on homes over £2 million.

In December 2014 stamp duty structure rates were raised significantly on each band, and a new system was introduced - instead of being payable on the entire price, Stamp Duty is now calculated by cumulatively adding the rate on each bracket. So the first £125,000 of a property purchase is completely free of tax, the bracket between £125,000 and £250,000 attracts Stamp Duty at 2%. etc. At the higher ranges, the rates have since been very high: 10% Stamp Duty is payable on the band between £925,000 and £1,500,000, and 12% is payable above £1,500,000.

Present stamp duty rates are:

  • Up to £125,000 - 0%.
  • Over £125,000 to £250,000 - 2%.
  • Over £250,000 to £925,000 - 5%.
  • Over £925,000 to £1,500,000 - 10%.
  • Over £1,500,000 - 12%

On April 1, 2016, a new stamp duty surcharge of 3% on top of the current Stamp Duty Land Tax (SDLT) became effective. The higher rates apply to purchases of additional residential properties in England, Wales, Northern Ireland, and Scotland (separately announced in the Scottish Government´s Budget).

A slight change in stamp duties was implemented since November 22, 2017, which was only applicable for first-time buyers. First-time buyers are now free of tax on the first £300,000 on properties worth up to £500,000, then 5% on the remaining portion between £300,001 and £500,000. However, if the property exceeds £500,000 then the standard rates apply on the entire property price.

Table of Rates for Buy-to-let Properties

  • Up to £40,000 - 0%
  • From £40,001 to £125,000 - 3%
  • From £125,001 to £250,000 - 5%
  • From £250,001 to £925,000 - 8%
  • From £925,001 to £1,500,000 - 13%
  • Over £1,500,000 - 15%

Example calculations of stamp duty rates:

Home price - stamp duty payable

  • £250,000 - £8,800
  • £350,000 - £16,800
  • £450,000 - £24,800
  • £500,000 - £28,800
  • £750,000 - £48,800
  • £1,000,000 - £72,550
  • £2,000,000 - £212,550

Source: StampDutyRates.co.uk

The general effect is to significantly increase levels of Stamp Duty payable on buy-to-lets. On a £300,000 flat bought as a residence, the buyer will pay £5,000, but when bought as buy-to-let, as much as £14,000 is now payable (4.6%). Big difference! Charges mount further on large properties. Want to spend £1,000,000 for a normal-sized house to convert it into 5 flats? Stamp duty is £73,750, or 7.4% of the purchase price. (See effective Stamp Duty rates at different price-bands here: www.stampdutyrates.co.uk and Buy-to-let calculator).

It seems likely that many potential landlords will balk at these high Stamp Duty rates.

This is in addition to changes made in the Summer 2015 budget where landlords only receive mortgage interest relief at the basic rate of income tax at 20%, a tax change which starts from 2017.

Another change for buy-to-let investors is that from April 2019 landlords will have to pay Capital Gains Tax (CGT) within 30 days of selling a property. Currently, any CGT due gets paid at the end of the current tax year.

These moves, as well as the "Annual Tax on Enveloped Dwellings", a separate tax on companies purchasing houses in UK, have had a significant impact on the willingness of potential buy-to-let landlords to invest. According to a study by real estate firm Countrywide released in July 2017, the share of British homes owned by overseas owners has dwindled to 5% of the total that year, from a 12% share seven years ago. The number of foreign landlords in London shrank to 11% in 2017, from 26% in 2010.

UK Prime Minister Theresa May unveiled a new plan to increase the stamp duty on both individuals and companies who are not registered tax payers in the UK, during the Conservative Party´s conference in September 2018. The increase being considered ranges from 1% to 3%.

This proposed plan seem to only add pressure on the market. "Further taxes on international buyers sends out a conflicting message about post-Brexit Britain being ‘open’ to the world," says Cluttons LLP´s head of research Faisal Durrani. Durrani noted that if the new surcharge is confirmed, residential forecasts should be revisited "with a view to making further downward revisions".

Despite all this, the fall in Sterling has encouraged some extra international buy-to-let buying in London. "Over the last year, London has bucked the trend with a pickup in international landlords," sais Hamptons International´s analyst Aneisha Beveridge. "Sterling’s depreciation, effectively offering international buyers a discount, combined with a softening London market, has helped offset the additional higher costs of owning a buy-to-let property in the capital for foreign investors," according to Beveridge. From 7% in the second half of 2017, the proportion of overseas-based landlords in London rose to 12% during the first half of 2018, according to Hamptons International.

[2] The Panama Papers and anti-money laundering moves

Following the Panama Papers leak of April 2016 which suggested that a large amount of money laundering was feeding into London´s property market, former prime minister Cameron announced in July 2016 that the UK would publish information on property owned by foreign companies and that a consultation would be launched on how to improve transparency.

"My message to fraudsters is: ´London is not the place to stash your dirty cash" said Cameron. He announced that foreign firms that own property in the UK would have to declare their assets publicly, and be on a new register if they hold UK property or want to compete for government contracts.

More than 100,000 UK property titles are registered to overseas companies, with more than 36,000 properties in the capital owned by offshore firms. In total around 2,800 companies set up by Mossack Fonseca are connected to more than 6,000 title deeds on British property - mostly in London - worth at least £7 billion.

´The crackdown on foreign ownership and property investments could possibly freeze the already slowing market,´ says Stirling Ackroyd Legal CEO Emon Ahmed. In London, the Battersea Power Station Development company held back some Frank Gehry and Foster + Partners designed apartments after its CEO confessed that the market had become ´quite challenging´.

Peter Wetherell, chief executive of Mayfair firm Wetherell, said potential buyers may decide to rent instead of buying. "This latest Panama issue uncovers where wealthy people are putting or investing their money, so it going public is a massive loss of privacy for the people concerned," said Wetherell.

On June 26, 2017, the EU´s 4th Money Laundering Directive became UK Law. The directive, according to the legal and professional services firm Gordon Dadds, may lead to a longer buying process, higher costs, and a doubling of real estate agents´ administrative burdens. The buying process could slow by up to 186 days, with estate agents required to carry out further diligence in verifying property buyers and sellers. Workloads are expected to double, say Gordon Dadds, as all policies will need to be tailored to every client.

"This is going to create substantial challenges for the property sector especially given the final version of the directive has only been made public today which has left no time for banks, estate agents and the lending sectors among others to update their policies and processes alongside training staff on the new regime," according to Gordon Dadds partner Alex Ktorides. "Some agents have in excess of 100 branches and have received no prior time to implement the new processes in order to comply. For many smaller estate agents and surveyors this will be the first time they will have carried out checks on both the buyers and sellers and they are going to have to get up to speed with the regime as quickly as possible or risk facing a unannounced visit from the HM Treasury."

An amendment to the sanctions and anti-money laundering bill backed by Labour MP Margaret Hodge and the Conservative MP Andrew Mitchell, would force Britain´s 14 overseas territories to adopt public company ownership registers by the end of 2020 - including the British Virgin Islands (BVI), which hosts more than half the offshore companies mentioned in the Panama Papers, according to Transparency International.

Aside from that, the Department for Business, Energy and Industrial Strategy (BEIS) announced in July 2018 that the UK will adopt the European Union´s fifth anti-money laundering directive. The directive´ sures include the creation of public company registers, and a cross-border database of company and trust owners, among many others.

[3] Right-to-Buy extended

The UK government has stated its intention to extend Right-to-Buy discounts to 1.3 million housing association tenants in England, funding these subsidies by the sale of high-value council housing. Prior to the 2017 general elections, Prime Minister Theresa May and the Conservative Party have already been pushing for measures to encourage building more new council houses.

"Giving tenants a new right to buy these homes when they go on the market will help thousands of people get on the first rung of the housing ladder, and fixed terms will make sure money is reinvested so we have a constant supply of new homes for social rent," according to Prime Minister May.

In August 2018, the government announced a pilot scheme of extending right to buy on a voluntary basis to housing association tenants in Midlands. The scheme, which costs around £200 million, pledges to replace sold properties with new affordable homes.

In the Global Property Guide´s view, the policy could increase downward pressure at the lower end of the UK housing market, especially in depressed areas, by giving existing tenants a financial bonanza and extra mobility, by putting their low-end housing on the market.

Help-to-Buy Scheme

On the other side of the demand / supply scale, the government has extended government Help to Buy schemes, designed to help homebuyers acquire homes. Assistance is provided through either an equity loan or a mortgage guarantee.

Through the Help to Buy Equity Loan, the government will loan homebuyers up to 20% of the full purchase price of a new-build property, provided that borrowers contribute 5% of the property price as deposit, and secure a mortgage for the remaining 75% of a property. The homebuyer is not allowed to sub-let the property and it must also be his/her only property.

The Help to Buy Equity Loan was initially intended to run until March 31, 2016, but the Department for Communities and Local Government (DCLG) has confirmed that the scheme will continue until 2021.

In December 2015, a Help to Buy ISA was introduced. In this new savings scheme, a first time buyer (FTB) can save for their first home through a Help to Buy ISA account for a maximum amount of up to £200 (US$ 262.95) per month. To open an account, the FTB should make an initial deposit worth £1,000 (US$ 1,314.75). When the FTB buys his first home, the government will give a 25% cash bonus (or a maximum bonus of £3,000 (US$ 3,944.25)) in addition to the FTB´s savings. Help to Buy ISA accounts are limited to one per person, so in a case of a joint buyer (i.e. married couple) both individuals can own one ISA account.

Some argue that Help-to-Buy is putting upward pressure on house prices. But Grenville Turner, chief executive of property firm Countrywide, contends "Claims that the Help to Buy scheme is causing a housing bubble are far from the truth and the facts speak for themselves".

"As a proportion of transactions both parts of Help to Buy together support only 2% of transactions in London compared with 10% in the north-west, where support is most needed. The scheme has had a positive impact on house builder confidence with many now believing that they can sell what they build, which as we know means they will build more."

The first 10 months of the Help to Buy Equity Loan scheme saw 14,823 new properties bought through the scheme, mostly first time buyers. A further 4,666 new homes have been reserved. This means that 1 in 5 (19%) of all private dwellings built in England are being sold through the scheme, according to Countrywide´s Quarterly Market Review. In some more depressed housing market areas, almost 50% was bought through the scheme. Particularly in the North East, where house prices remain well below 2007 levels, house builders have relied heavily on the Help to Buy Equity Loan scheme to sell houses.

"Up to a third of some house builders´ order books are composed of homebuyers using the Help to Buy Equity Loan scheme to buy their new home. This highlights the extent to which the scheme is supporting new house building, and the reliance of developers on it outside London and the South East to achieve sales," according to Countrywide.

This claim of Turner is supported by a more recent analysis of Richard Donnell, Hometrack´s director of research, who found that homebuilders often place their developments for Help to Buy in areas with house price declines since their peak in 2007. "Builders are using it to support delivery in weaker housing markets. Without Help to Buy, would some of these developments in some of these areas have been viable?" according to Donnell.

During the year to March 2018, there were around 48,000 completions under the Help to Buy Equity Loan scheme, an increase of 21% from the same period last year. The scheme accounts for around 8% of England´s total house purchase mortgages during the same period, though higher shares of the scheme to mortgages was observed in the North (10%) and the East Midlands (9%), according to Nationwide.

“It is unclear how much Help to Buy (HTB) activity represents additional demand and how much has simply replaced activity that would already have taken place. The scheme has, however, been a key source of demand for newly built homes in recent years. Indeed, HTB has accounted for more than a third (37% in the last 12 months) of new build completions in England. This is even higher in some regions, such as the North West, where HTB accounted for nearly half of new build purchases," said Chief Economist Robert Gardner in Nationwide´s August 2018 report.

Rental growth is picking up; a ban on letting agent fees

Rents in Great Britain are picking up, increasing by 1.6% during the year to September 2018, following a 1% y-o-y rental growth rate in the previous month, according to Hamptons International.

For the first time in four months rents in London rose , with a rent increase recorded in Inner London.

RENTS ACROSS REGIONS

Sept 2018 Aug 2018 Sept 2017 Sept 2018 y-o-y (%)
Greater London £1,714 £1,702 £1,712 0.1%
East of England £963 £957 £937 2.8%
South East £1,055 £1,052 £1,032 2.2%
South West £814 £807 £795 2.3%
Midlands £690 £689 £674 2.4%
North £650 £648 £637 2.0%
Scotland £660 £658 £655 0.8%
Wales £683 £683 £657 3.9%
Total £980 £975 £965 1.6%
Source: Hamptons International

A new Tenants´ Fees Bill banning letting agent fees got its third and final reading in the House of Commons in September 2018 and now moves on to the House of Lords.

The government believes that the ban will spare private housing tenants from paying fees amounting to hundreds of pounds. The ban is also expected to further improve transparency for tenants. According to consumer group Citizens Advice some tenants are being charged up to £700 (US$ 913.57) worth of fees, with an average tenant paying £337 (US$ 439.82). Fees have risen over 60% over the last five years, according to Citizens Advice chief executive Gillian Guy.

Weak housebuilding activity

The UK´s per capita housebuilding rate is low by international standards, and failed to respond to booming house prices during the boom, due to building regulations and planning constraints. The situation improved during the later years of the boom, but output declined again during the recession.

In 2017, a total of 197,290 houses were started in UK, up 12.5% from the previous year. Likewise, the number of homes completed rose by 5.5% to 178,470 houses in 2017, according to the Department for Communities and Local Government (DCLG). Researchers from the Town and Country Planning Association (TCPA) have warned that at least 250,000 new homes must be built annually to match population growth, to replace the ageing housing stock and the accumulated backlog.

Homebuilding stagnated at an average of 186,000 new units annually between 1991 and 2003, and from 2004 onwards barely exceeded 200,000 annually (222,940 in 2007).

A reform of the planning system, relying on local initiatives, is under way to speed the system up and expand the housing supply. However, the government´s budget constraints are putting all this under threat.

The government is targeting around 240,000 new dwellings annually until 2020. However, the target seems unrealistic, since output over the past 20 years has been around 150,000 dwellings annually.

RICS suggests that the long-term outlook inevitably involves severe housing shortages and increasing house prices.

Slower expansion expected in 2018; Withdrawal Agreement still in limbo

UK gdp unemployment

The UK economy grew by 1.7% in 2017, the country´s weakest expansion since 2012, according to the Office for National Statistics (ONS). This weaker growth followed 1.9% economic growth during the year of the Brexit vote in 2016.

The UK´s GDP growth per capita figures are unimpressive. In 2017, GDP growth per capita was 1.2%, following per capita GDP growth of 1.1% in 2016, 1.5% in 2015, 2.3% in 2014, 1.4% in 2013, 0.8% in 2012, and 0.6% in 2011, according to the International Monetary Fund (IMF).

In general, the UK´s recovery since the recession has been anaemic, at best. In previous recessions, there was above average growth. For instance in 1983 GDP grew by 4.2%, and in 1994 by 3%. The UK´s growth mostly relies on its services sector, according to Office for National Statistics (ONS).

The Bank of England (BoE) expects an even slower economic expansion in 2018 at around 1.3%, to be followed by a 1.7% growth in 2019.

"The outlook for growth, employment and inflation depends significantly on the nature of EU withdrawal, in particular: the form of new trading arrangements between the EU and UK; whether the transition to them is abrupt or smooth; and how households, businesses and financial markets respond," says the BoE´s November 2018 Inflation Report.

In November 14, 2018, a draft text of the Withdrawal Agreement between the UK and the European Union was agreed upon by officials of both parties, as reported by the BBC. The EU27 nations then approved the Brexit deal during a special summit held in Brussels on November 25. However, the agreement is still subject to the approval by Parliament, who will vote on the deal on December 11, 2018.

While ratifying the agreement would reduce uncertainty and could assure economic growth in the short term, the agreement itself contains some parts that might hinder the Parliament´s approval. One is the Irish backstop, a last resort effort to maintain an open border between the Republic and Northern Ireland, which would come into effect if both the EU and the UK fail to reach a free trade deal before the transition period ends in December 2020. The backstop could lead to Northern Ireland being more aligned to the EU, creating a different customs regime in the area than the rest of the country.

Northern Ireland´s Democratic Unionist Party (DUP), which supports UK Prime Minister Theresa May´s minority government, has already indicated that they are against the backstop. DUP leader Arlene Foster said in an interview on BBC´s Andrew Marr Show on November 25 that the party "cannot support this deal".

Prime Minister May has already rejected the backstop proposal and proposed a "Chequers plan" in July 2018, creating a free trade area for goods and scrapping customs checks between the UK and the EU. However the Chequers Plan will not work, according to European Council president Donald Tusk.

According to Ireland´s deputy government head Simon Coveney, if the British government doesn´t support the draft Withdrawal Agreement´s wording on the backstop, then they should propose "a viable and legally operable alternative wording that delivers same result: no border infrastructure". The EU´s position is that there will be no withdrawal agreement and transition period after Brexit, if there´s no agreement on the backstop.

The UK is scheduled to officially leave the EU on March 29, 2019.

In the July to September 2018 period, the UK´s overall unemployment rate was at 4.1%, slightly up from the 40-year low rate of 4% in August, but still a bit down from 4.3% a year earlier, according to the ONS.

The UK´s inflation stood at 2.4% in October 2018, down from 3% in October 2017.

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