South-East property prices moderating while AI could deliver 40,000 jobs – PwC Economic Outlook

  • House price growth in SE set to outpace UK average by 2022
  • South East to be fastest-growing UK region in 2018 and 2019
  • Growth in Artificial Intelligence (AI) will  create as many jobs as it displaces, but the SE can expect AI to create over 40,000 new jobs by 2037

The South-East can expect house price inflation to fall behind the UK average over the next four years, but the region will still have the most expensive property prices outside London. That’s according to PwC’s latest UK Economic Outlook (UKEO).

The SE region is forecast to experience a boost of around 2.3% this year, 3.1% in 2019 and average 3.3% between 2020 and 2022. Average house prices, currently around £318,000, are set to reach £369,000 by 2022, the report says.

PwC says the SE market is reflecting most of the rest of the UK, with the UKEO predicting some softening of national property price growth to around 3.4% by 2022.

The UKEO says the SE economy is set to be the fastest-growing UK region, growing by1.5% in 2018, and improving next year, with PwC forecasting that the region should grow by around 1.8% in 2019. That’s well above the forecast UK average of 1.3% for 2018 and 1.6% in 2019.

PwC South East regional chairman Keith Harrington said:

“Across the South-East, the property market continues to perform better than expected, with a positive balance between earnings and house prices. However, prices still remain high, but we expect house price inflation to moderate somewhat over the next four years.

“We have also considered the effect of future interest rate rises, and believe that only around 11% of UK households would be immediately affected if rates increased. Based on this, the Monetary Policy Committee would not be overly concerned about small rate rises causing significant short-term economic damage.

“However long-term forecasts can be impacted by a range of factors, and there are some noteworthy issues that could impact the region’s strong economic growth. We are still at the top of the UK regional growth league but, with Brexit on the horizon, it’s important that we maintain investor confidence and support the region’s significant exporters.”

PwC’s latest UK Economic Outlook also highlights the impact that AI may have on UK employment in the two decades to 2037 and, while the central estimate suggests that the overall net effect of AI on UK jobs may be broadly neutral, this is not true for individual sectors.

The most positive effect is seen in the health and social work sector, where PwC expects the number of jobs to increase by nearly 1 million, equivalent to around 20% of existing jobs in this sector. On the other hand, the report estimates that the number of jobs in the manufacturing sector could be reduced by around 25% due to AI and related technologies, representing a net loss of nearly 700,000 jobs.

Sectors that are likely to benefit the most from AI are highly “human” sectors and highly technical sectors. These include health and social work activities, education, professional and scientific and information and communications.

Applying this formula across the UK regions suggests that the impact on the South East will be positive, amounting to a net gain of around 41,000 jobs by 2037, second only to London and considerably more than other regions where thousands of jobs - mainly manufacturing - could be at risk.

Looking to the future, Keith Harrington says the overall outlook for 2019 is mixed:

“The UK economy held up well in the six months after the EU referendum, but growth slowed from early 2017. This slowdown continued into early 2018, while higher inflation has squeezed real household incomes and this has taken the edge off consumer-led growth.

“The stronger global economy should continue to have some offsetting benefits for the South-East and overall net exports this year, although there are downside risks in 2019 and beyond if recent US tariff policy changes were to escalate into a wider international trade war.

“We’re also encouraged by the potential for AI to grow existing businesses and attract new investment and maintain the region as a leader in technology and growth.

“Brexit-related uncertainty and the absence of any UK-EU agreement may also continue to hold back business investment across the UK while the continued uncertainty around post-Brexit border controls impacting inward and indigenous investment and general business confidence.

“The next 12 months will be important for the UK and the South East’s medium-term growth, but as at today, the regions is starting from a strong base.”

View the full UKEO report at www.pwc.com/UKEO

Contact us

Keith Harrington

UK Risk Assurance Clients and Markets Leader, PwC United Kingdom

Tel: +44 (0) 7740 923348

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