UKMar 2 2018

Brexit stops firms investing in UK, says Investec's Brazier

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If there is not much more clarity on Brexit in the next few months, companies will make investment decisions that are not in the best interests of the UK, according to Investec Asset Management’s Simon Brazier.

Asked whether any of the companies in his £2bn Investec UK Alpha fund were concerned about the implications of leaving the EU in 2019 and how it will impact their ability to trade, Mr Brazier confirmed they were.

"I think a lot of them are loathe to make those statements too public," he added.

He said he had put companies into three boxes in regards to Brexit, with the first of those being the globally diversified, cash generative, defensive firms.

"They’ve been dealing with global uncertainty and politics, some of them for hundreds of years. For them, it’s not as big an issue," he conceded.

If we know what a company’s worth, when it becomes cheaper relative to that, it gives us the opportunity.Simon Brazier

"But there is a second group of companies, clearly, who are exposed to currency because either they produce in the UK or they have large input costs coming from the UK and that’s something they’re trying to mitigate, but actually there’s uncertainty there."

However, he warned that the companies with investment decisions to make were “the ones I’m the most worried about”, including those in financial services, industrials and paper and packaging sectors.

"These companies are telling me, day after day, that ‘with the current uncertainty, we are unable to make that investment into the UK’," he revealed.

Mr Brazier said: "Here we sit, at the beginning of March nearly a year away from the official exit date from the EU and, it is clear to me, that if there is not much more clarity in the next few months we are going to start to see those companies put into place some of their preparedness plans where they will be looking to make decisions that will not be in the best interests of the UK. 

"Because they have to protect their overall businesses and that investment will not be in the UK."

Mr Brazier, who has been running the fund since 2014, when he moved from Columbia Threadneedle Investments, said he had exploited the recent stockmarket volatility.

"If we know what a company’s worth, when it becomes cheaper relative to that, it gives us the opportunity," he said.

The manager also discussed how he incorporated environmental, social and governance issues into his stockpicking process.

He confirmed: "We’ve decided not to take a box-ticking approach. Actually, it should be, as you said, fully integrated."

"We will do over 200 company meetings a year in the UK. That’s where the real governance bit comes in, where we’re questioning companies, not just on their latest results but how they’re allocating capital, how they’re remunerating themselves, and how they’re treating the environment, their suppliers," he explained.

The Investec UK Alpha fund has generated a 19 per cent return in the three years to 27 February 2018, according to FE Analytics, just lagging the IA UK All Companies sector average return of 20.4 per cent in the same period.

eleanor.duncan@ft.com