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With the EU referendum vote on 23 June 2016 the UK experienced an immediate impact on both the stock market, its currency and with the UK’s trade position and international economic relations changing significantly.
The pound fell significantly after the Brexit vote, and has since been trading 13.26% lower with the dollar and 12.67% lower with the euro compared to before the referendum.
Despite this initial turbulence and the weakening pound, the UK has remained resilient and investor confidence has risen since last summer, which can be measured by UK share prices. The FTSE 100 has risen 18.65% since Brexit, which may be linked to the pound’s decline. Similarly, FTSE 250 is 15% higher than on 23 June 2016. It is likely that this will remain volatile until there is greater clarity about the UK’s Brexit deal. After the recent election, held on 8 June 2017, the UK has been left with a hung parliament, which builds uncertainty over the final make-up of the Brexit deal.
Research by USC Wealth Management found that 70% “wealthy” people (over $1million) believe that Brexit will have a positive impact in the short-term and an even higher proportion say it will have benefits in the long term. The general belief is that Brexit has not affected their view of the UK as a positive investment haven. Their survey also outlined that those most positive about Brexit are wealthy individuals between the ages of 18 to 34, with 83% saying that Brexit will have a “positive impact”.
In fact, international firms are showing their intention not to be affected by Brexit, including Toyota who have invested £240million in a huge plant in the East Midlands of the UK.
The business investment sector in the UK in Q1 2017 has increased by 0.6% compared to Q4 2016 (Oct to Dec) and the public corporation dwellings sector increased by a shocking 30.1% between Q1 2016 to Q1 2017.
As of April 2017, the average house price, which as per the UK House Price Index, has risen by 4.1% in the year to March 2017.
The volume of spending in shops and online grew by 0.7% in Q4 2016 which is 2.9% higher than Q4 2015, increasing the Consumer Price Index by 2.6% in the year to April 2017, showing no signs of consumer’s confidence being a cause for concern as some early fears had suggested.
In addition, the continued high employment rate of 74.8% for the 3 months to April 2017 portrays a strong UK economy.
From a tourism perspective, Brexit does not seem to have much of an effect on the UK and the amount of tourists entering the UK has increased by 11% bringing along extra spending.
In conclusion, leaving the EU may not be as worrisome as previous commentators have suggested, and may provide additional opportunities for international investors wishing to invest in the UK. Brexit negotiations are to begin on 19 June 2017, and we will await the outcome with interest!
