Analysts at the French banking group say the Brexit vote will damage the UK economy and "almost certainly" see some companies relocating to retain Single Market access.

London’s residential property market could see a “severe downturn” in light of the UK’s decision to leave the European Union, said Societe Generale.

“While in recent stress tests, the major UK banks were assessed with declines of around 30 per cent in commercial real estate prices, we fear that London residential could experience an even more severe downturn,” Societe Generale analysts including Marc Mozzi wrote in a note to clients on Monday. 

“Brexit will damage the UK economy, and some companies will almost certainly have to relocate parts of their business to retain access to the EU Single Market.”

During the week that followed the Brexit vote, the number of transactions in the prime central London market was 38 per cent higher than the prior week, with average prices down -0.2 per cent in June, according to Knight Frank data.

Societe Generale analysts noted that the recent rebound in real estate stocks may turn out to be just a “dead cat bounce”, adding that commercial property values in the UK may fall 25 per cent from their peak on rent declines and could fall further if concerns about frozen property funds spread. Recent property fund suspensions triggered by the referendum result include those by Aberdeen Asset Management, Standard Life Investments, Aviva Investors, M&G and Columbia Threadneedle.

At a press reception recently attended by this publication, Societe Generale reaffirmed its commitment to the UK market, stressing that London remains a key hub for its operations, which include private banking and asset management business lines.