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Five things investors need to know about Brexit

The UK voted to leave the European Union over a year ago now, but what have we learnt in the meantime about how this monumental decision will impact investors?

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Topic: Economy, Investing

There’s no escaping Brexit: we hear about it in the news every week, so we’ve sifted through all the noise to identify the key issues that could affect you and your money. Here are the top five things we think investors need to know:

The UK economy is still in good shape

Companies represented on the FTSE 250 index get around 70% of their revenue from the UK. That means it may act as a more accurate barometer of the UK economy than the FTSE 100 (which is made up of the 100 largest UK firms). The FTSE 250 has showed a 12% overall spike since June 2016, so it seems that UK companies have remained more robust over the past year than many people predicted.

 

The passive pound is under attack

Much has been made of the pound’s freefall against the euro since the EU referendum: on 23 June 2016, one GBP was worth 1.30 euros but at the time of writing, that exchange rate had dipped to 1.13 euros.

If the pound remains weak, UK importers will feel the pain of more costly materials and the price of goods and services may go up. Certain sectors, such as agriculture, may find it harder to source labour from EU countries after 2019 and car manufacturers may find EU tariffs and new customs laws affect their bottom lines.

The housing market is losing momentum

As inflation has continued to outpace wages, there has been a significant slowdown in the housing sector, with London being impacted the most.

According to Nationwide, in May 2017 UK house prices have fallen for a third consecutive month – for the first time in eight years. Despite this uncertainty, reduced supply means UK house prices may well remain resilient.

Inflation remains volatile

Despite a recent blip this month, inflation in the UK has risen faster than expected so far in 2017 and this can have an impact on investing in certain types of companies. For example, energy companies are likely to pass rising costs onto their customers so may post increased profits as a result.

 

A slowdown in mergers

In many cases, when two organisations merge or one buys another, it can spell good news for company shareholders. The uncertainty around the outcome of Brexit negotiations have contributed to a 25.5% year on year decline in the overall number of mergers and acquisitions in  2017.

While the weakness of the pound makes many UK companies an attractive takeover target, there is a ‘wait and see’ strategy being deployed by many prospective overseas suitors until they know what the granular detail of Brexit and its impact on the economy, jobs and trade deals will be.

You can plan for the unknowns

We may be in a time of uncertainty, but our proactive research team and Investment Managers are fully up-to-speed on how Brexit arrangements could influence markets, no matter which course they take. This means they can manage the impact any developments may have on your portfolio.

If you’re considering investing for the first time with a view to growing your money in these uncertain times, take a look at our latest infographic which asks if now is the time to stop saving and start investing?

To view our ‘A year since Brexit’ infographic please click here.

 

The information in this article is for private circulation and is believed to be correct but cannot be guaranteed. Opinions, interpretations and conclusions represent our judgement as of this date and are subject to change. The information contained in this article does not constitute a personal recommendation and the investment or investment services referred to may not be suitable for all investors.

 

 

 

 

 

 

 

 

 

 

 

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