Preparing for Brexit

After four and a half years of Brexit back and forth, the news of a Christmas trade deal between the EU and UK has been understandably welcomed by investors. Markets were particularly concerned about a damaging No Deal outcome but the agreement means we can look forward to 2021 with a measure of optimism. UK stock markets have so far reacted positively and should be in a better position to attract flows from international investors as the fog of uncertainty clears. Sterling is also continuing to trade near this year’s high against the US Dollar although the lack of a sharp move suggests a deal was largely priced-in already. The reaction in gilt markets has also been muted with the Bank of England expected to keep interest rates low for the foreseeable future.
Of course, we should not kid ourselves that the deal is an improvement, from an economic perspective, on the UK’s membership of the single market. There will be more trade friction than before and there is precious little in the agreement on areas like financial services. UK sovereignty has been reinforced but the economy still faces a prolonged period of adjustment to the new arrangements and there will no doubt be ‘bumps in the road’. However, as we move into the New Year, the focus of investors will likely now move back to issues such as the vaccine-led recovery from Covid and the impact of a new President in the White House.

Our focus is always to deliver good outcomes for our clients in whatever political or regulatory environment. Throughout the Brexit process, our view has been that it’s in the best interests of investors for the government to move as swiftly as possible to a conclusion to give certainty to markets. We now know that although a trade deal has been agreed, there is very little which relates to Financial Services and nothing which would change the impacts of Brexit and our plans to address them.

Breaking Down Brexit Podcast:

Our weekly podcast on all things Brexit and investing

If you want to know more

Get in touch with us so we can tell you more about how we work.

Contact us

Related content

Investment insights
Dealers' Early Call
All insights
Weekly comment: Testing economic policy
All insights
Diary of a Fund Manager - The Lights Are On

Post-election comment

Weekly comment

Monthly market comment: December

Subscribe to our Monthly Market Commentary

A wider perspective on events and pressures affecting global politics and economics. We look at events of the last month and our expectations for the next.

Subscribe

Straight from the experts

Enjoy articles and infographics from our expert research team, as they discuss their predictions and the rationale behind their investment picks this month.