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How Brexit Might Change the European Investment Landscape

There is a great deal of uncertainty in the air in the UK as the Brexit deadline draws nearer and it remains unclear exactly what will happen and how this will impact the UK, Europe and the rest of the world.

This makes it impossible to say how Brexit will impact the European investment landscape, but it is possible to look at what a few scenarios might be depending on Brexit in the form of Theresa May's deal, a no deal Brexit or further delays/a second referendum.

The Impact of the Referendum

The uncertainty over what will unfold in the coming weeks, months and years understandably is making any investor feel nervous regardless of which way they voted or how they feel about how events have unfolded since the vote back in June 2016. Following the result, sterling plummeted, investments halted and many large UK firms began weighing up their options and considering moving overseas - something that has occurred lately with a number of large household brands.


Despite these worrying signs, there have been some interesting developments that any investor needs to be aware of. Many smaller companies in the UK with the FTSE Small Cap index returned 38% over the last two years compared to 31% for the FTSE 100. Despite this, it remains impossible to say what Brexit will mean for these smaller companies until there is some certainty over what happens.

Investor Advice

So, what is the best approach in the meantime for UK investors? The best advice is to continue as normal and try to diversify your portfolio - you may even find that there are some great homegrown opportunities to capitalise on. Obviously, there is not much demand for “big ticket” purchases right now such as cars, furniture, housing etc along with non-essentials like leisure. This means that, for now, these are industries that are best avoided until the future is clearer and consumers are more confident in spending. Conversely, there are a few areas which are worth looking into for UK investors. These include challenger banks, technology firms and brick companies.

Investing into the EU

While Brexit has made the UK a less attractive place for investors currently, it appears that the referendum result saw investments in the European Union rise sharply from UK investors - a 12% increase between the middle of 2016 and September 2018. This could continue in the near future and beyond but will depend entirely on the eventual outcome and what the result has on the UK economy.

What Leaving Could Do

It is hoped, and one of the major arguments that supporters of Brexit made, that the UK withdrawing from the EU will enable target trade with economies which are surging outside of the EU but research has shown that this has not happened yet in preparation for Brexit. Of course, in addition to Brexit consumer demands and culture is constantly evolving with many major changes taking place in a number of key industries around the world which provide certain opportunities for investors to be aware of.

Second Referendum

It seems that the waters are murky right now and agreeing on Theresa May’s deal or a no-deal Brexit is likely to have an immediate negative impact on sterling and the economy. In the case of a second referendum, it is hard to predict but many believe that this would boost sterling and especially if this resulted in a different decision to the original as investors would swoop in to take advantage of bargains.

Taking Stock

The best course of action for UK investors to take right now is to rely on investment management services, like Wellington Management. Businesses like this have the resources and experts to identify good investment opportunities and identify certain risks which may otherwise have been missed. It is an incredibly complex time in terms of the investment landscape right now so it can be helpful to have experts in your corner to help you navigate these tricky times.

The European investment landscape is incredibly murky at the moment as the deadline draws nearer. It is impossible to predict what the near future and future will hold regardless of what happens in the coming weeks which understandably is making investors nervous. The key will be to avoid making rash decisions, to try and see the big picture and to speak to professionals who can help to guide investors through these difficult times.

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