Brexit guidance for investors
While experts are advising a “wait and see” approach in the wake of the summer’s EU Referendum, there are some things to look out for in the short term
The announcement of the result of the UK’s EU Referendum on Friday 24 June came as a shock to many people at home and abroad. Within hours David Cameron had announced his resignation. The pound fell to its lowest level against the dollar for more than 30 years. Stock markets around the world lost ground on the news.
The UK was stripped of its triple A credit rating and Nicola Sturgeon announced that a second independence referendum in Scotland was highly likely. Scotland’s First Minister has since announced at the SNP’s Conference in Glasgow that she will publish a new Referendum Bill for Scotland.
Whether it will be a ‘Hard-Brexit’, or a ‘Soft-Brexit’, or a ‘Norwegian-Brexit’, or even a ‘Canadian-style-Brexit’, remains to be seen. We got a few brief insights into what Prime Minister, Theresa May and her team of Brexit ministers are considering at the recent Conservative Party conference. But we’re likely to find out a lot more about the UK Governments stance, and the position they will take, in November’s Autumn Statement.
Theresa May told the Conservative conference that the UK will aim to begin formal negotiations to leave the EU by the end of March 2017.
Dates for your diary
The new Chancellor, Philip Hammond, will deliver his Autumn Statement on 23 November and he has made it clear that many austerity measures will be relaxed to stimulate the economy. He has already talked about a “fiscal reset” and the target of clearing the deficit by 2020, set by his predecessor George Osborne, has already been dropped.
It is expected that the UK Government will use fiscal policy tools to protect the economy from a Brexit-related downturn. A significant investment in infrastructure projects designed to boost domestic growth is widely expected. Following quickly on Mr Hammond’s heels, Derek Mackay, the Scottish finance secretary, will announce his first Scottish Budget on 15 December.
In a change to the usual timing of the Scottish Budget, Mr Mackay announced that, due to the uncertainty around Brexit and what the UK Government intends to announce, he has decided to delay the publication of the Scottish Budget until after the Autumn Statement. So, it could very well turn out to be a busy three weeks of policy making at SNP HQ.
Guidance for investors
From a consumer perspective, there is some good news around. Incomes are rising and employment is at an all-time high. House prices have yet to fall far from their pre-referendum levels.
While stocks and shares initially fell sharply on the news, both the FTSE 100 and FTSE 250 have recovered ground. The fall in the value of the pound is good news for exporters as their products become cheaper for foreign buyers; the devaluation acting as an enticing discount.
The Bank of England’s Monetary Policy Committee has already introduced a rate cut to 0.25 per cent and has indicated that further stimulus measures could continue to be applied if necessary to steady the economy. Many commentators have concluded that, so far, the impact has been rather less pronounced than many had predicted. There will no doubt continue to be good and bad economic news in the coming months as events unfold.
In the short term, it’s widely accepted that there will be shocks in currency, shares and property markets ahead. But for now, there is no reason to panic, and every reason to adopt a “wait and see” stance.
All eyes will now be on the Autumn Statement on 23 November and the Scottish Budget on 15 December. We
will publish highlights of both statements and their implications for our clients on www.maco.co.uk and www.mafsltd.co.uk
This article is intended to provide a general review of certain topics and its purpose is to inform but NOT recommend or support any specific investment or course of action. It is important to take professional advice before making any decision relating to your personal finances. Martin Aitken Financial Services Limited is authorised and regulated by the Financial Conduct Authority.
About the author
Ian Finch is a director at Martin Aitken Financial Services. To contact Ian, email if@maco.co.uk
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