Founding Partner, Investment StrategistAlfred is a global investment specialist with more than 20 years’ experience. Having started his career as a trader, Alfred has spent years learning the intricacies of the various markets including stocks, bonds, commodities, consumer financial products, property, and more.
As the Theresa May government prepares to invoke Article 50, all eyes wait to see how the negotiations will affect our economy. The waiting game is prompting investors to wonder whether they should put their money into UK opportunities post-Brexit or not.
As with just about any other contentious issue, opinions on UK investment vary widely. There are staunch proponents who believe our economy will only strengthen as a result of leaving the EU, recommending investors start looking for great opportunities now. There are staunch critics telling clients to avoid investing in the UK at all costs. And, of course, there are those who continue to sit on the fence.
Proponents: Keep Investing in the UK
In the weeks and months prior to the Brexit vote, there were plenty of warnings of pending economic collapse should voters decide to leave. Not only has that collapse not materialised, but foreign entities have been knocking on the door asking where they can invest. According to a 30th December article published by the Telegraph, the UK secured more than £15 billion in additional foreign investment in the final six months of last year.
Better yet, International Trade Secretary Liam Fox announced earlier this year that his department had already managed to secure more than £16.3 billion in direct investments in a full range of sectors covering everything from energy to property development. The Telegraph went so far as to say billions of pounds of additional deals are likely in the works even though they have not yet been publicly disclosed.
While Mr Fox was praising the foreign investment numbers as evidence that the world is anticipating a stronger post-Brexit economy in the UK, Leave proponents Michael Gove and Iain Duncan Smith were drawing a clear dividing line between those who believe the UK can survive without help from Brussels and those who believe economic collapse is still imminent. We know which side they are on.
Critics: Do Not Invest in the UK Now
The other side of the investment coin is covered by Brexit critics who believe investing in the UK right now is not a good idea. According to the Independent, one of Europe's largest financial management consultants is now warning clients to steer clear of Britain. Roland Berger chief executive Charles-Edouard Bouée says investors should stay away due to the sheer complexity of upcoming Brexit negotiations.
Bouée says his company is firmly advising clients to remain as flexible as possible while they wait to see how negotiations will play out. He sees plenty of uncertainty ahead with the understanding that neither Brussels nor UK negotiators will necessarily be willing to give an inch to the other in what is shaping up to be a very complicated separation.
Roland Berger is also advising foreign clients with operations in the UK to consider using UK companies to carry out work for the time being. They are advising against assuming any additional assets that investors would not be willing to let go if necessary.
One final concern is that Britain will no longer be the financial powerhouse of a post-Brexit Europe. Germany's banking regulator is just the latest European government agency in warning to that effect, but there is a reason to believe that the warnings are completely unfounded.
Let Cool Heads Prevail
The two extremes in the investment debate are easy to identify. But what is the actual truth? It is probably found somewhere in the middle. For that reason, the best advice investors could receive is to let cool heads prevail. There is no point in completely avoiding UK investment, nor does it make sense to throw all your financial eggs into the UK basket.
There are plenty of good reasons to believe that the UK economy will continue to roll along even after separation from the EU. There are plenty of reasons to believe that we are not as dependent on the EU as many people think. As just one example, consider a study published last autumn by the non-partisan think tank Civitas.
The study looked at how many jobs were actually in jeopardy as a result of our decision to leave the EU. The study found that while it is true some 3.6 million jobs in the UK are linked to EU exports, 5.8 million jobs in the EU are linked to their exports to the UK. Simply put, the EU stands to lose more jobs if it takes a hard-line in exit negotiations.
Also, do not forget that Europe will still depend on the UK military for joint security long after the separation is complete. According to the Telegraph's Julie Lenarz, that's why Angela Merkel recently met with Theresa May in London. European reliance on our military gives us a strong upper hand in negotiations.
Different Strategies Required Now
Common sense dictates that investment in post-Brexit Britain will require some different strategies. But this is not unique to the Brexit scenario. Different strategies will be necessary for investing in the US throughout the Trump presidency. Likewise, political changes in France and Germany following their elections this year will necessitate a change in investment strategies. This is how the investment world works.
The UK will survive its separation from the EU. There will be no financial or economic collapse, and companies will not run screaming from the UK in search of greener pastures. Our home will still be a great place for both foreign and domestic investment.
- Telegraph – http://www.telegraph.co.uk/news/2016/12/30/britain-has-secured-15billion-extra-foreign-investment-since/
- Independent – http://www.independent.co.uk/news/business/news/roland-berger-post-brexit-britain-do-not-invest-uk-eu-leave-management-consultancy-charles-edouard-a7576931.html
- Heatstreet – https://heatst.com/world/think-tank-found-more-european-jobs-dependent-on-britain-than-british-jobs-on-the-eu/