EUROPE - Balfour Beatty chief executive Ian Tyler has said the construction firm's appointment for the final phase of a City office development for AXA Real Estate was an "encouraging sign" of new activity in the London commercial sector.

AXA's prime speculative development is one of only two scheduled for completion in London's financial district in 2013.

It is the product of a joint venture set up last year between AXA and developer Favermead.
Tyler made his comments as Ernst & Young's ITEM Club forecast that the UK economy would flatline for the rest of the year, paralysed by political uncertainty in the euro-zone.

It claimed the UK economy was "probably in technical recession", with no recovery likely until inflation fell in the second half of the year.

Only corporate resilience in the US and other markets would keep the UK out of a double-dip recession, it added.

"With the consumer still reeling from the effects of high inflation, the political paralysis in the euro-zone and worries about emerging nations' ability to drive the recovery have put the UK economy on hold," the report said.

Despite moribund property activity elsewhere in the UK, a report published last week by Cushman & Wakefield suggested severely constrained supply in the City would continue to attract overseas investment, especially from funds, which accounted for 44% of City acquisitions last year, and sovereign wealth funds.

City yields remain stable at 5%.

City investment partner Bill Tyser said: "We'll end up with only sovereign wealth funds capable of buying in the City.

"Private investors can buy in the West End where lot sizes are smaller, but what do they know about London?

"They know where to shop, but they don't know the City. It could be outer Mongolia as far as they're concerned."