On 2 June 2021, four months after the UK's formal application, it was announced the UK can start the process of joining the 11-country Comprehensive and Progressive Agreement for Trans-Pacific Partnership ("CPTPP").
Accounting for 500 million people and making up 13% of the world's GDP, the CPTPP brings together member nations, including Japan, Canada, Australia, Singapore and Mexico, to focus on improving market access, and pledging to eliminate 95% of import charges or tariffs.
With UK trade within the group worth £111 billion in 2019, the announcement is undoubtedly good news for the UK, but what does it mean for UK real estate investment and the prospects of international trade as we step tentatively out of the pandemic and into a post-Brexit future?
The UK's partnership in the trans-pacific trade pact will bring important benefits across the entire country, including legal and professional services, SMEs and investment opportunities. The benefits will flow through deepening the UK's access to a multitude of fast-growing markets and major economies outside of Europe. And whilst the immediate benefits may not be immediately apparent due to the UK's involvement in / negotiation of trade deals with member nations outside of the CPTPP, and the protracted Brexit discussions, the long-term benefits for the UK include:
- modernising digital trade rules, removing barriers for businesses and increasing protection for commercial source code and encryption technologies;
- streamlining the elimination of tariffs on UK exports; and
- easier travel between CPTPP countries.
Impact on UK real estate
The size of the CPTPP members creates significant inward investment potential, predominantly in London. However, we are increasingly seeing clients identifying greater value in the regions. In particular, the UK has already attracted substantial investment from Canada and Singapore, with both countries being in the top 10 investors in London office real estate in 2018 and 2019. With even fewer barriers to investment, we can expect this trend to continue and, in light of the government's levelling up agenda, further extend into the regions. As details of the trade deal with Australia emerge, we can perhaps expect Australia to follow Canada and Singapore in terms of inward investment.
Given the UK will be the first European nation to join the pact, use of the UK as a gateway to the CPTPP market may also act to draw in businesses from other member nations. In turn, this could work to reduce concerns of any form of exodus following Brexit and, as the economy recovers post-Covid, will be a likely comfort for landlords.
The addition of the UK to the CPTPP will also signify the first nation to accede to the pact, with the existing 11 nations being founding members, as well as the first nation outside of the Pacific area to join. Given the lack of harmonisation of regulations required, it may well be the case that several other countries will follow the UK's lead, further increasing the potential for trade and investment.
Another important point to note is the interest in involvement from both China and the US. Prior to the ratification of the CPTPP, the US had been in negotiations with the 11 members to enter into an earlier iteration, being the Trans-Pacific Partnership, but negotiations ended following Trump's election. The welcome change in administration has suggested a return to the table may be on the cards. China has also indicated a desire to join. Given the scale of investment into the UK by both China and the US, this could represent a significant boost to future inward UK investment opportunities.
So, early days for UK membership of the pact, but a positive sign for future investment flows and the strengthening of trade relationships in a post-pandemic, post-recession and post-Brexit period.
Originally Published 22 June 2021
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