British economy remains robust despite currency depreciation

Although these assessments led to a huge depreciation of around 20%
in the value of the pound on the foreign exchange markets, the British economy
has nevertheless performed surprisingly well over the past few months. Leading
indicators dropped only temporarily. In Q3, GDP expanded by 0.5% on the
preceding quarter.

The number of job vacancies remained high, although it fell
in particularly Brexit-sensitive sectors. The unemployment rate has remained
consistently low and, according to the latest figures available, the rate of
employment even managed to grow slightly in the June to September period.
Property prices fell across the country before the referendum, but have
remained more or less unchanged since.

Only London has seen a slight decline
in recent months. However, house prices both in London and nationwide are
substantially higher than last year. Nevertheless, we continue to expect that
burdens on the economy will gradually begin to be felt. Once the first signs of a
slowdown are registered, hiring freezes and investment cuts could quickly
trigger a domino effect.

In this negative scenario, the UK’s and, in particular,
London’s international character could rapidly have a boomerang effect,
especially as many expats already have to endure major losses in purchasing
power due to the depreciation of the pound. What is more, a number of recent
press reports indicate a deterioration in social attitudes towards non-British
citizens.

If this continues, highly qualified Europeans are especially likely to
welcome a change. More than 400,000 EU residents of employment age and
over 50,000 Germans were living in London in 2015. After the referendum,
Frankfurt welcomed potential new residents with a website
(www.welcometofrm.com), set up to provide expats with information about living
and working in the city.

How expats react will, in effect, be a seismograph for UK
politicians, measuring both the intensity and also the after-effects of the Brexit
shock. The harder Brexit is, the more immigrants and employees will leave the
island, a number of whom will come to Frankfurt. This would be a further factor
driving up prices in the Frankfurt property market, already beset by a number of
existing bottlenecks.