The round-up of the stories that a budding Student Lawyer should be aware of this week. Sign up here to get these updates in your inbox every week.
Article by Gina Asadi (recent BPP LLM Legal Practice (Solicitors) graduate)
The property market in the UK has been on the decline since the 2016 Brexit vote. Late 2019 saw the property market recover as the uncertainty surrounding Brexit began to ease. The Bank of England reported that mortgage approvals for properties had increased in early 2020. However, the property market was not the only thing on the rise; the coronavirus had been rapidly spreading across the world, paralysing economies. The coronavirus eventually hit the UK and the country was forced to go into lockdown on the 23rd March, causing the economy to decline.
In an effort to control the spread of Covid-19, the government has limited all non-essential movements. These measures have meant that estate agents, buyers and surveyors are unable to visit properties to complete a purchase. The UK’s current lockdown has meant that there is no ‘functioning market’ for properties. Further, the current strain on the economy as a whole has left the public wary of investing large sums in properties. The government has also advised sellers and buyers to delay any moving dates, which has led to about 373,000 property sales worth £82 billion being on hold. This hit on the UK property market has never been experienced before; the decline in the market is steeper than the position during the financial crisis.
However, analysts are not predicting a strong collapse in house prices. Property experts such as Frank Knight, Savills, Zoopla, etc. have all estimated a decline in property prices of a range of 5 per cent and 10 per cent, depending on the UK economy’s position post Covid-19. Further, specialists have predicted that house prices will begin to slightly improve in 2020 before gradually making a recovery in 2021 and 2022.
The current situation has left sellers, buyers, surveyors and property lawyers in need of governmental guidance. However, the guidance given has left many with unanswered questions on how to best structure a property transaction. Sellers, buyers, surveyors and lenders will be turning to property solicitors to advise on the limited circumstances in which a transaction can be completed, as well as, the practical and financial aspects of the deal.
Article by Jamie Howarth (LLB Law student at ULaw)
Billionaire investor Warren Buffett’s company, Berkshire Hathaway, has sold all its shares in the four largest US airlines: Delta, American, Southwest, and United. During the virtual annual shareholders’ meeting, Buffett said, ‘we will not fund a company […] where we think it is going to chew up money in the future.’ This statement reflects the poor state of US stock markets, which show ‘nothing attractive’, even after the recent plunge. By comparison, Berkshire Hathaway invested a significant amount in Goldman Sachs, General Electric, and Bank of America during the 2008 financial crisis.
Berkshire Hathaway only made the decision to invest in airlines in 2016, but, following reports of more than a $50bn net first quarter loss, the conglomerate made the decision to sell off all their shares in the aviation sector, totalling over $6bn. This amount consisted of 11% of Delta, 10% of American, 10% of Southwest, and 9% of United. The latter three declined to comment on these transactions, but Delta said in a statement that it was aware of the sale and remains ‘confident that the strengths that are core to Delta’s business […] will endure and position Delta to succeed.
Buffett’s reasoning behind the sales is a sentiment shared by investors globally; it is almost inevitable that the business will not come back up to its working capacity from pre-coronavirus, thus there will be more planes than passengers. The demand has all but dried up. The omission to invest by one of the most trusted in the business is likely to mean that other investors will not have the confidence to invest, meaning the aviation industry has not seen the last of its struggles yet.
Airlines have had to deal with a multitude of issues during the coronavirus crisis. British Airways and Ryanair have announced mass redundancies, Richard Branson has infamously requested a government bailout for Virgin Atlantic, and FlyBe went into administration. With no clear plan for resuming air travel, and with the majority of planes now parked up across the world, it is apparent that few airlines will come through the crisis unscathed.
Article by Zyeraph Bucalan (Final Year LLB Law, University of Leicester)
British Airways follows the trend of airlines fighting for survival as they set to make 12,000 staff redundant from its 42,000 workforce. The airline’s parent company, IAG, reported a fall of 13% in revenues (£4bn) for the first three months of 2020. With the second quarter expecting more losses due to continuing travel restrictions and severe declines in passenger traffic.
IAG’s imposed ‘restructuring and redundancy programme’ will also see trimming flight schedules by a quarter. BA has already cut 94% of its flights in April and May. However, the pilot’s union, Balpa, will be fighting against the job cuts. Earlier this month, BA agreed with unions to reduce costs which lead to the furlough of more than 30,000 workers. Any money borrowed and the government’s job retention scheme to furlough employees seems to only be short-term solutions.
There is an expected slow recovery in the level of passenger demand, compelling restructuring measures to address longer term challenges. Other airlines also follow suit, as seen by Boeing cutting their workforce and production to mitigate their losses.
Article by Sofiya Stanchak (Third Year LLB student, University of Surrey)
Since the Coronavirus pandemic hit the world earlier this year, countries have introduced tough lockdown measures and business have shut their doors, having a dramatic impact on economies. The US economy has suffered their most severe contraction (a decline in national output as measured by gross domestic product) in more than a decade due to the lockdowns imposed to slow the spread of the virus and the worst economic crisis since the 1930s. The US economy was expected to grow 2% this year but instead it sank at an annual rate of 4.8% and marked its first contraction since 2014, with the worst yet to come between April and June as restrictions were only put in place in late March.
Consumer spending in the US (which accounts for two thirds of the economy) dropped by 7.6% in the first three months and spending on food services and accommodation fell by 70% whilst clothing and footwear sales have gone down by 40%. Even health spending plunged, despite the virus, as concerns about the virus caused doctors to postpone routine treatments and other medical care.
The US has already started putting measure in place to soften the impact of the crisis by the Federal Reserve lowering its benchmark interest rate by 50 basis points to a range of 1% to 1.25%, relaxing banking rules and launching a $700bn stimulus programme which is a part of a co-ordinated action announced in the UK, Japan, Eurozone, Canada, and Switzerland.
As well as these measures already implemented by the Federal Reserve, it has also introduced four radical moves they will be applying to save the economy.