A recent report by the Centre for Economic and Business Research predicts that by 2028 China will be the world’s top economy, while the UK will overtake Germany to become Europe’s top economy in 2030. This report argues that savvy investors must act now to take advantage of this massive growth potential.

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The relationship between China and the UK is continuing bear fruit. In the past year alone Chinese investment in the UK has almost doubled, making the UK the popular investment destination in Europe with more investment than the next four most popular EU destinations
combined.

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As illustrated above this is an upward trend that continues to grow (Contact ONS for up to date graph) and is forecasted to grow further exponentially. Gibbs Investment therefore seeks to build a relationship with Chinese investors by extending a hand and offering our Real Estate expertise.

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The dynamics of Real Estate in the United Kingdom are changing dramatically, providing real opportunities for investors who are prepared to look away from the increasingly saturated London market. As the global economy rebalances itself, many investors are seeking assets which provide the most potential for growth. It is clear that London property is here to stay with the city frequently cited as the world’s #1 city, containing more of the world’s super rich elite than anywhere else on the planet and London property viewed as a safe haven for foreign money.

Despite this there are concerns that the London market is becoming saturated, as sellers raise prices to increasingly ridiculous levels (even for the super-rich) investors are looking elsewhere for areas which can provide better returns. This is reflected by upmarket estate agent Savills predicting that house prices in the South East will rise 32% over the next five years, compared with a predicted rise of 24.4% in London. As a consequence of the sheer size and international prominence of London, the media spotlight rarely shifts away from the region but the real story of 2013 was house prices in Manchester rising by a spectacular 21% in that year alone. Gibbs investment believes this is an indicator of things to come.

A number of commentators have noted that the United Kingdom does not conform to what’s known as Zipf’s Law, which implies that the population of a city is inversely proportional to the city’s rank in relation to other cities. Illustrated below with Germany, Brazil, China, United States, India, Indonesia, Nigeria and Russia we can certainly see that although hardly an exact science, there is an observable trend.

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Most interestingly, these patterns do not correlate with the United Kingdom, as observed below:

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However, when we add the populations Manchester, Leeds and Liverpool together we can see Zipf’s law becoming more apparent:

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When combined, Manchester, Leeds and Liverpool posses the biggest concentration of industrial and commercial business in the UK outside of the South East. Once the global economy kicks back into full gear we can foresee major development in this area as not only as a consequence of the rise of China but other developing nations also. There are a number of reasons for this, firstly the UK can be viewed as a gateway into Europe but also this “North West Urban Area”, as a consequence of its geographical location within the former British empire, it already has significant infrastructure present that is being exploited by internationally renowned developers.

The includes a maritime infrastructure which is presently being utilised by Peel in an ambitious Atlantic Gateway plan to create a shipping centre for the region. As the cost of oil rises and fuel becomes scarce, this creates the need for a logistical “cluster” – essentially a designated shipping zone with the aim of minimizing global transport costs and increasing
efficiency.

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Peel has underlined its ambition to achieve this by upgrading the maritime infrastructure to accommodate the significantly larger container ships (post-panamax) that are now roaming the seas as a consequence of the aforementioned need to increase efficiency. The Peel Group has estimated that this scheme alone has the potential for up to 250,000 new jobs along the gateway. Such developments create a unique opportunity for investors and this is only one of the developments with Chinese backing, once HS2 (the high speed railway line connecting Manchester to London) is built, suddenly the region will become a super port with a high speed connection to the world’s most significant city. Manchester Airport is already the third busiest airport in the United Kingdom (in addition to being the international gateway for the north) with double the number of passengers to its nearest non-London rival. The potential of the airport has no doubt been seen by the Chinese as the Beijing Construction Engineering group is one of a number of investors ploughing £800 million into the airport, developing it into a huge “airport city”.