More than half (59%) of people believe that staying in the EU would be ‘the most advantageous outcome’ to London development activity, according to the autumn edition of the London Development Barometer (LDB).

The survey – which was administered in October at the time when the UK government was attempting to negotiate a revised Brexit deal before the October 31 deadline – revealed that 23% of respondents had no preference to staying in the EU, leave with a deal or leave without a deal.

It also found that just 5% believed London’s development activity is best served by a no deal Brexit.

The LDB was launched in Autumn 2017 to measure industry sentiment across a number of factors affecting London development activity. Despite Brexit fears lulling since then, Brexit has consistently been cited as one of the industry’s top two concerns.

In fact, a majority (76%) of the respondents still believe that Brexit will have a negative impact on London development activity, compared to 80% two years ago.

The results reflect the industry’s gloomy outlook on the benefit of the Article 50 extension six months ago, when 48% of respondents did not believe it would lead to a better deal, compared to 36% who did.

What’s more, almost 60% agreed the ongoing uncertainty would have a negative impact on development activity, while 13% foresaw a positive impact.

With Brexit still unresolved, key indicators suggest that the impact of global economy and politics are being felt by the industry. Some 63% believe these factors will have a negative impact on development activity, rising from 52% six months ago and 42% one year ago. Similarly, over half (57%) believe global politics will have a negative impact, compared to 48% six months ago and 50% a year ago.

Construction skills and capacity continues to be the two top other concerns in the industry, with 75% believing it will have a negative impact on development activity, compared to 85% a year ago and 78% two years ago. Construction cost is third, wit 63% predicting a negative impact on London development activity.

Additionally, with a dip in foreign investment into London, just 42% believe inward investment levels will either increase or remain the same, compared to 64% six months ago and 51% one year ago. Asia is expected to be the largest investor according to 73%, followed by the Middle East (15%) and The Americas (7%).

The outlook for development finance is also in decline; just 71% predict it will become more expensive and only 27% believe it will become more readily available. These figures were at 65% and 37% respectively six months ago.

However, the results suggest the industry’s overall cautiousness surrounding London development activity has levelled, with 43% believing there will be less development activity in the next five years, compared to 46% a year ago and 57% two years ago.

On the brighter side, confidence in market demand remains positive. Some 89% an 85% of respondents forecast an increase in demand for senior living and affordable/council housing, increasing by 5% and 11% in the last six months respectively. Meanwhile, 78% foresee an increase for Build to Rent.

Retail remains the exception, with 86% predicting a decrease in demand, and just 3% predicting a rise.

Confidence in mayoral policies has improved significantly, with 47% believing there will be a positive impact, compared to 35% six months ago. Over half (65%) also predict government investment will have a positive impact, up from 55% six months ago, while 68% predict that Crossrail 2 will have a positive impact on development activity – although this figure slipped from 77% a year ago.

Lastly, the industry’s view of government remains dim, with 80% believe they are not doing enough to enable development in the capital. The public believe improving the town planning process should be the top priority for government, with calls to mitigate the Brexit transition period in second place and funding for local authorities, infrastructure and housing delivery in third.

Richard Hollingworth, director of M3 Consulting, comments: “Whilst London remains a globally important destination for real estate investment, decision makers appear to be hesitating whilst a Brexit resolution remains just out of reach.”

“Nonetheless, the industry continues to show signs of optimism, as confidence in market demand is still high across most sectors and the outlook for development activity remains relatively steady.”