Over the last few months we’ve heard many different versions of what Brexit could mean for the UK. Now that we’ve officially voted to leave the EU, are we any closer to finding out what the future holds for our country’s finances?
We asked our financial advisor, Carl Hilton, director of NOW Financial Planning, to cut through the noise and explain what the result could mean for the finance and wealth management sector, and consequently, for UK businesses.
Here’s what he had to say:
Several experts predict that little will change. Mark Carney, governor of the Bank of England, argued that the banks have been prepared for this referendum result, saying that: “Some market and economic volatility can be expected as the process unfolds. As a result of these actions, UK banks have raised over £130 billion of capital, and now have more than £600 billion of high quality liquid assets. Moreover, as a backstop, and to support the functioning of the markets, the Bank of England stands ready to provide more than £250 billion of additional funds through its normal facilities.”
However, Neil Woodford, of Woodford Investment Management, argued that Brexit will nevertheless result in a cloud of uncertainty over UK businesses, saying that: “We now face a period of uncertainty as the exact terms of Britain’s exit from Europe are negotiated”.
One consistent view is that Brexit will invariably have short-term consequences on the financial sector and UK businesses. Stuart Mitchell said: “It’s very difficult to know the implications at this point, but in the short-term, assets will be under a lot of pressure. The UK accounts for only around 6% of European exports and so, while there is likely to be some contagion, the impact on European growth is not obvious. The impact of the fall in sterling will be cushioned for investors with European holdings – as a European fund, you will lose less money. We are much more focused on core Europe than on the UK.”
Despite unavoidable short-term consequences for the financial sector and UK businesses, Neil Woodford argued that businesses generally will not feel a long-term impact following the referendum result. He said: “We [commissioned] an independent report on the economic implications of Brexit. It concluded that Britain’s long-term economic future would be largely unaffected by a decision to leave the European Union. We stand by these conclusions. In the near term it is likely UK GDP will be lower over the next 18 months or so than if we had voted to remain but in the longer term the trajectory of the UK economy, and more importantly the world economy, will not be influenced significantly by today’s outcome.”
Although the short-term consequences of the referendum result have already started to surface, a number of experts agree that businesses will not see many long-term effects. However, Britain’s vote to leave the EU brings with it uncertain times, which means that it is even more important for companies to keep up with trends in the finance sector in order to be successful.
