Brexit Update: Goodbye, it’s been nice knowing you!

investment strategy

Brexit Update: Goodbye, it’s been nice knowing you!

By

Paul Ashworth, Managing Partner
David Clark, Director
Tristan Bowman, Manager


Posted 31 January 20

Today marks the final day of the United Kingdom’s official membership of the European Union (EU) and the beginning of a post-Brexit UK. So, what does the year ahead hold for a newly single UK?

Is this the last I will hear of Brexit?

No, the withdrawal agreement enacted today is merely a staging post in the long journey to a Brexit resolution, marking the beginning of the transition period one which the finer details of a trade agreement will be negotiated. During this period the UK will continue to abide by EU rules despite no longer being a member.

Given the complexity of the final trade deal, it is unlikely that it will be completed by the 2020 deadline, with the prospect of a “No Deal 2.0” still alive. However, five-years of Tory Government with a significant majority in the House, should finally allow this issue to be resolved.

Will it impact the economy?

Yes, and we think it will have a beneficial impact. UK business investment growth has been weaker than other advanced economies since 2016, as business has delayed investment until there was greater Brexit certainty. The improved clarity, and certainty of a majority government, provides the potential for this pent-up investment to drive greater economic activity.

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Adding to this, we expect a large increase in planned government spending following the election outcome, with additional spending allocated to the NHS a certainty. In totality, government spending should raise GDP by 0.4% over the next three years.

The increase in fiscal spending is expected to be supported by continued easy monetary policy in the near term. The Bank of England (BoE) has taken a hard-line stance of the negative impacts of Brexit and is likely to allow the economy to ‘run-hot’ rather than restrict growth and risk a recession.

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Outlook for 2020

Since the referendum outcome we have viewed Brexit as a long-term benefit to the UK, providing a catalyst to reorientate away from a systemically stagnant Europe, whilst still enjoying the relatively low trade barriers that the EU normally offers other countries under the World Trade Organisation’s non-discriminatory provisions.
The tight labour market, weaker pound and continued policy support should provide a solid foundation for growth in 2020.

Peace of Mind Investing

Cameron Harrison have been advising business owners and their families on asset allocation and intergenerational wealth management for over 50 years. We have demonstrated over a long period our ability to manage investments through both the good times and bad by keeping the client at the centre of our business.

For more information on our approach to investment strategy or any other inquiries, please contact us on +613 9655 5000.