With the Brexit deadline having been pushed from pillar to post little is certain about the UK’s future. Despite having had three years to strike a deal, the UK government failed and the EU27 were forced to grant Theresa May an Article 50 extension. Donald Tusk, European Council President, originally granted a 12-month extension. However, the prime minister accepted a ‘flextension’ of 6 months’. This means the UK has up until the 31st October 2019 to cement plans and trigger Article 50.
As per usual the uncertainty surrounding Brexit is rife. Many investors have been anticipating how the impending departure of the country will affect their portfolios. With decisions still very much up in the air many people are preparing for a no-deal or hard Brexit. Whatever the outcome, how is the future shaping up for the UK’s investors?
Moving money overseas
Research from the world’s largest global funds transaction network has revealed that UK investors have moved £62 billion overseas to other countries in the EU since the 2016 referendum. This year many investors felt the threat of a no-deal Brexit looming and following the failure to trigger Article 50 in March, placed a net £2.7 billion in EU-based funds in just that one month. Considering just £2.5 billion was moved offshore in the eighteen months running up to the referendum, this is a huge figure.
The majority of investors’ money has been stowed away in Dublin and Luxembourg. This means the money will remain inside the EU’s regulatory jurisdiction whenever the UK leaves the EU.
Not all investors have sent their money to EU hubs. However, political triggers over the past three years have seen more and more individuals place their money offshore as instability related to Brexit increased. Experts report that it is typically high-net-worth individuals sending their money overseas, suggesting that investors with diverse and expansive portfolios are more concerned with the impact of Brexit.
Stocks and currency
Investments that could feel the brunt of Brexit according to financial experts include stocks and currency. Investors looking to branch their portfolios into these areas or are considering investing new money will need to be vigilant of the political state of play facing the UK.
However, it should be maintained that nobody at this point can predict the power Brexit will have on the finance industry. Understandably, the high level of uncertainty still surrounding Article 50 is perturbing even the most experience of investors. Financial markets and uncertainty are not two works you want to go together and the lack of decision making and concrete plans from Theresa May is casting doubt regarding stock and currency investment.
No deal Brexit
Despite an extension there is a chance that the UK could face a no-deal Brexit. This could have the biggest negative impact on investors. Financial experts are advising investors to seek the help if an IFA to avoid the risk of losing capital.
Stock market decline
Back in 2016 the stock market did decline when the referendum result was announced. Despite the three years of continued uncertainty the market knew Brexit was upon us and had already factored this in to prices, meaning there was only minor impact throughout the negotiation process. However, whenever the prime minister finally triggers Article 50 nobody can predict how the FTSE 100 will react. Some financial experts are warning that the markets will plummet once, and if, the UK leaves the EU.
The Bank of England
It is not just the markets that need to be considered following Brexit; the Bank of England will also react in their own way. Experts are predicting that interest rates are most likely to be affected, with the Bank of England likely cutting them. This could be a recipe for disaster for investors with stocks in finance companies.
The future of UK investment
There are so many potential outcomes regarding Brexit that it is hard to picture the path of personal finance and where it is heading. It is certain that 2019 will be a turbulent year for the UK as a whole. However, investors understand that investing is a risk and are often aware that any political or social change can impact their portfolios.
If you are unsure of how to handle your investments during this period seek the guidance of an independent financial adviser.