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Brexit – What’s next for investors?

June 28, 2016

A nation voted. With a 72.2% turnout, 17.4 million (51.9%) votes were cast to leave the EU, compared with 16.1 million (48.1%) to remain, according to the Electoral Commission. It was unlikely that a decision of such scale would take place without significant ramifications and as it stands, Brexit has divided the nation. The economy is now in a position of indefinite uncertainty, with calls for Article 50 to be invoked as soon as possible in order to clarify the economic position for both the UK and the countries remaining within the EU. The months and years ahead will be a turbulent and volatile time for private and corporate investors. With the right guidance and expertise of experienced investment professionals, amongst the confusion, there are still opportunities to invest in new opportunities with either short or long term rewards. We find out more about the post Brexit economic landscape, and the response from the Rycal Investment Group.

Building The Post Brexit Future

For anyone with an interest in business and the economy, waking up on Friday 24th June 2016 was the start of a journey into the unknown. As the markets opened, the FTSE 100 plunged by 8.7pc, with the FTSE 250 falling by 7.2pc, the worst performance since Black Monday. This drop cost £25bn to the value of the index, with almost a quarter lost from the value of some stocks. Bloomberg reported that some of the hardest hit by these losses were Britain’s billionares with an overall loss of $5.5bn (£4bn) on Friday. Leave supporter Peter Hargreaves, the co-founder of Hargreaves Lansdown was amongst these numbers, with his net worth falling 19pc to $2.9bn (£2.1bn).

One of the main concerns for London is the loss of the EU Passport to allow banks and financial institutes to operate across Europe’s capital market. The relocation of branches and companies to outside of the UK could cause huge financial losses for the economy of the Capital. In an ongoing pattern of change, Moody’s downgraded the UK’s credit outlook to negative following the Brexit decision. Colin Ellis of Moody’s was interviewed by BBC Radio 4** where he explained “Following the vote there is clearly likely to be a prolonged period of uncertainty now. That will have a negative impact on the UK’s credit standing and we don’t know how big that impact will be.”

He continued, reaffirming concerns from before the referendum took place, “Uncertainty has real consequences – we expect spending decisions by households and firms to be delayed. That will have an impact on confidence and that will have an impact on growth.”

In a report from the Institute for Public Policy Research (IPPR) (Saturday 25th June) IPPR’s chief economist Catherine Colebrook stated that the fall of the pound would have a disproportionate impact on the poorest 10pc of households.

She explained in the analysis: “Because poorer families spend a higher proportion of their disposable income, the poorest 10 percent of households will be hit the hardest by these developments.”

“In the weeks and months following this initial financial market reaction, we will be hit by the perfect storm of reduced consumer spending power; a reduction in business investment as businesses put their plans on ice; and the heightened risk of a downturn across Europe.”

As it stands, uncertainty is the overriding concern. No investment is ever without risk, but in a turbulent climate, anyone considering the long term performance of a current portfolio, or expansion within the EU, is less able make informed decisions based on facts, past performances and projections. As yet, no one can predict how long negotiations will take place in order to leave the EU, but there is much groundwork to be done even before discussions can commence, such as appointing trade associations which do not currently exist. To re-establish confidence could take years. For investors, this could be the ideal to time to look outside the European Union……

Simon Calton, CEO of Rycal Investment Group, a UK based company but with US offices discussed; “The US is still the safest place, invest in U.S dollars…. diversify and look for a long term strategy”

For investors from the UK, investments conducted entirely between the USA and UK are an attractive proposition and a viable diversity option. The relationship between the US and UK is unlikely to be negatively impacted by a Brexit. State Spokesman Kirby stated last Friday “We have a close historical relationship with the UK economically and politically and we will consider how the UK, as it negotiates with the EU, fits into our strategy of pursuing broad trade partners”

“The special relationship remains a special relationship,” he said. “We’re confident that, no matter what the implications are of this vote, that the relationship between the United States and UK will remain as strong as ever.”

Areas of growth within the US have been identified by Carlton James borrower Sky Watch Group. For example, demand for hospitality in the US in certain areas exceeds supply. Hotels located in the proximity of development sites, which drive a number of channels of revenue, such as oil fields and highways, can quickly reach capacity leaving those without accommodation to have to travel further afield, costly and time consuming. Carlton James Skywatch Inn Ltd have established an innovative scheme to acquire hotels and hospitality in these high demand areas, with an opportunity for investors that leverages strategic planning by the Carlton James. Investors can opt for early returns or a longer term investment plan, dependent on their own preferences, and, although no investment is without risk, the due diligence processes carried out on each opportunity make these options attractive to those seeking diversification and increased yields from their portfolio.

Naturally, Brexit has attracted significant controversy and media coverage, and as yet, the long term market performance cannot be predicted. It may not be only the UK that choose to take this path with German Chancellor Angela Merkel stating that the EU must respond to citizens of the remaining 27 states who question what benefits they get from membership. It is likely that for the foreseeable future the European market will remain uncertain, however, increasing options to diversify outside of the EU can offer investors exciting new opportunities.

 

 

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