Brexit has dominated both the news and cast a shadow over the UK’s long-term economic outlook. The parliamentary deadlock has depressed much of the financial sector. EY recently reported that post-Brexit some £800bn of assets are set to shift from the UK, while the FCA announced it has stepped up plans for a no-deal Brexit. Markets across the world have tumbled with trade wars between the US and China, the growing threat to globalisation and fears of international recession.
The elevated uncertainty has hit investor confidence, according to our latest Consumer Insights report. Most active investors are concerned about the potential long-term impact of Brexit on their investments. In fact, fewer than one in ten investors see Brexit as an opportunity, with younger investors and women particularly worried.
Yet despite investors’ fears about Brexit, remarkably few have made changes to their investments. There was a worry that with all the uncertainty there would be a mood of anxiety. Instead we find that most investors hunker down when volatility hits. They generally don’t make any new investments and they don’t sell any of their existing holdings.
It’s not just consumers that find Brexit and other financial turbulence is a challenging environment for investing. Advisers we have talked to are divided about in their reactions to these events. Some are steadfast against making any changes to portfolios – expecting the current political and financial volatility to be temporary.
Other advisers reduced their clients’ exposure to UK funds shortly after the referendum result but have then made few further changes in the ensuing two and half years. However, all the advisers we have spoken to agree that the greatest impact of the Brexit decision has been to increase currency risk and Sterling’s volatility. The general lack of investment panic has been gratifying.
With just 63 days to go, most investors and advisers are concerned about the impact of Brexit. However, even with all the uncertainty few are concerned enough to make proactive changes to their portfolios. For more information regarding our Consumer Insights research, then contact Jean-Luc de Jonge for details.