Brexit 

Guide to Brexit one year on

  • Understand the impact the Brexit vote has had on sterling and spending power in the UK.
  • Comprehend what the UK economy may look like post-Brexit.
  • Learn what advisers and investors should watch out for during the negotiations and whether the risks to pensions have increased.
CPD
60min
Guide to Brexit one year on

Introduction

At the end of March this year, prime minister Theresa May officially triggered Article 50, thereby marking the start of the two years the UK has to extricate itself from 44 years of EU membership.

It was an historic moment but followed only weeks later by her decision to call a general election, putting the formal negotiations between the UK and EU on hold.

By the time they were underway on 19 June, the Conservatives had lost their majority, inflation was surging and the pound was still in the doldrums.

But along with many other things, the implications of Brexit and Article 50 for investors and savers are unclear.

Edward Smith, asset allocation strategist at Rathbones, observes: “Political disarray could lead investors to lose confidence; or investors may assume that European negotiators will capitalise on the UK’s weakness, play hardball and so raise the risk of a ‘hard’ Brexit, to which the pound would react poorly.”

Predicting the outcome of something that is only just beginning to be negotiated is, of course, impossible.

While other countries have negotiated terms outside the EU, they have all taken different models.

One of the crucial lines of negotiations will be whether the UK remains in the single market or not – so far, the government has been clear it wants to leave. The impact of this is likely to be felt directly as it will be passed on in food costs and the prices of products and services.

But there are some fair assumptions to make in terms of the UK’s standing once it has left the union.

Stephanie Flanders, formerly chief market economist for the UK and Europe at JPMorgan Asset Management points out: “I think from an economic standpoint, the key thing, which is not something you’ll see overnight, is a less open economy and less integrated by trade with our closest trading partners, by definition because we’ve agreed we’re not going to be in the single market.”

She adds: “We’re not going to go over a cliff or be an unimportant economy. We’ll still be a major economy but we will over time have a slower growth rate, unless something surprising happens.”

This guide will attempt to analyse the ongoing impact of Brexit on sterling and spending power, and forecast what shape the UK economy will take post-Brexit.

It will also consider what advisers and investors need to watch for during the negotiations and whether the triggering of Article 50 has increased the risks to pension savers.

Contributors to this guide include: Léon Cornelissen, chief economist at Robeco Investment Solutions; Neil Williams, chief economist at Hermes Investment Management; Stephanie Flanders, chief market strategist for UK and Europe at JPMorgan Asset Management; Edward Smith, asset allocation strategist at Rathbones; professor Chris Rowley, Kellogg College at the University of Oxford; George Bull, senior tax partner at RSM; Glyn Owen, investment director at Momentum UK; Russ Mould, investment director at AJ Bell; Tom Selby, senior analyst at AJ Bell; Wouter Sturkenboom, senior investment strategist at Russell Investments; Steve Webb, director of policy at Royal London; Vinay Sharma, senior trader at ayondo markets; Will Hobbs, head of investment strategy at Barclays Wealth and Investments; David Page, senior economist at Axa Investment Managers; Ed Hutchings, UK sovereign portfolio manager at Aviva Investors; Keith Barber, director of business development at The Family Building Society; Nick Hayes, manager of the Axa WF Global Strategic Bonds; Josh Saul, chief executive at The Pure Gold Company; Adrian Lowcock, investment director at Architas; David Carroll, head of strategy at Seven Investment Management; Minerva Lending.

eleanor.duncan@ft.com

In this guide

CPD
60min
  1. Mr Cornelissen says the pound fell around 12 per cent against the euro and US dollar following the referendum, and that it fell another 1.5 per cent after what other political event?

  2. Mr Smith says the shape of the UK economy after Brexit depends on which two things?

  3. According to Mr Sharma, as the UK exits the EU which will take longer than two years, the UK economy will what?

  4. Mr Hayes predicts that should volatility pick up during the negotiations, for fixed income investors it "could be a great opportunity to pick up both government bonds and credit assets when yields and/or credit spreads rise". True or false?

  5. Which group of people does Mr Selby say have a rather more uncertain future around their pensions?

  6. Mr Sturkenboom says whether it has increased the risks to pension savers depends to a large extent on what?

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