Britain has been in political turmoil ever since we as a country narrowly voted to leave the EU three years ago.
The problem is that there seems to be no way to agree on exactly how leaving can be accomplished. It has led Prime Minister Theresa May to formally resign today. She will continue as interim PM until a new Tory leader is chosen, and finally leave office in July.
The obvious questions are, who will be taking her job, and what will their Brexit policy be? But at Continuum, we want to answer an even more important question. How can you ensure that Brexit will not affect your wealth?
The leadership battle
Many candidates have thrown their hat in the ring. All will need to solve the apparently impossible question of how to leave, and ideally with some sort of deal.
The alternative is the no-deal Brexit, or just possibly no Brexit at all.
No deal hardliner candidates include former Mayor of London and former Foreign Secretary Boris Johnson. He was a leader of the Leave campaign during the referendum, and currently may be the front runner. Also backing a no deal Brexit are Michael Gove, former Secretary of Education, Justice, and now Environment, Dominic Raab, former Brexit Secretary, former House of Commons leader Andrea Leadsom and extreme hardliner, former Works and Pensions Secretary Esther McVey.
On the other side of the fence, firmly against a no deal Brexit are International Development Secretary Rory Stewart, and Health Secretary (and ex Remainer) Matt Hancock. Sitting on the fence itself is Jeremy Hunt. The Foreign Secretary campaigned to remain in the EU, and now favours a negotiated deal but believes that Britain would survive and prosper without one.
The leadership contest does little to boost economic confidence.
What does the uncertainty mean for your money?
Over the past two years, Brexit uncertainty has had a strong impact on the United Kingdom’s economy. Some experts believe that it has shaved growth by about 0.3% per year, and that a no-deal Brexit might make things worse. Doomsayers predict a two-year recession and inflation running at more than 3.5%.
But the actual results of anything to do with Brexit are hard to predict. The lower value of sterling may have depressed households’ real purchasing power and company margins through higher import prices – but on the other hand, it has provided a boost for exporters.
A weaker exchange rate makes Britain’s cost of living higher – imports cost more, causing prices to go up, which could make the Bank of England more likely to consider interest rate hikes. But the labour market might remain buoyant with migration of EU nationals pushing wages higher.
However, the appeal of the UK for investors has certainly deteriorated. Several EU companies seem to be switching from British suppliers. Some UK businesses such as banks may even be considering moving headquarters to an EU location to continue to enjoy easy access to EU markets.
But remember, if a disorderly Brexit does happen, it would have consequences for UK trading partners as well as the UK. Top EU losers on goods exports would include Germany, the Netherlands, France and Belgium.
Simply extending Article 50 could help our ex-partners as well as ourselves by allowing more time for logistical preparation and minimising disruption. The next step would be a successful negotiation of a Free Trade zone with an open border with Ireland, zero tariffs on goods trade between the UK and the EU, and “passporting rights” for the UK`s financial sector. This Norway type of agreement might remove many of the negative effects of Brexit and be a lot more comfortable for all. But whatever form the departure takes, the trade and investment connections between the UK and the EU have started to adjust. Overall trade exposure of European countries to the UK has been reduced since 2015. Outside the EU, there is the hope that trade with the rest of the world will more than make up the difference.
What should you do?
It looks as though personalities matter. Whoever gets the top job and the policies they follow could have profound effect on the UK economy.
On the other hand, President Trump’s potential trade deal could mean a real boost to the UK economy and might be only one factor contributing to a real post-Brexit boom.
At Continuum, we have the expertise you need to safeguard and grow your wealth whatever direction the economy takes.
Our weekly newsletter is only one of the ways we have to keep you informed. Our service is personal, and your Continuum adviser will work with you not just to design a wealth management strategy that will aim to get you to your financial targets – but also to keep it under regular review, whoever sits in number 10.
To find out how you can prepare for Brexit, call us today.
The information contained in this article is based on the opinion of Continuum and does not constitute financial advice or a recommendation to suitable investment strategy, you should seek independent financial advice before embarking on any course of action.
The value of investments can fall as well as rise and you may get back less than you invested.