Brexit boom or bust? Place your bets…

As the clock struck 11pm on January 31, fireworks lit up UK skies with those that had voted to exit the European Union partying in the streets.

But while 52% of the population celebrated seeing their wishes come true, plenty of others vowed to stick with the EU… or at least attempt to re-join.

For the moment though, Prime Minister Boris Johnson has delivered on his promise to “get Brexit done” and has the rest of 2020 to negotiate trade deals with the bloc (and everyone else).

So, for the next 10 months (or so), the UK will remain in a transition period where from the outside things may not appear to be much different than they were pre-Brexit. However, it is these negotiations that will pave the way for the UK’s various industries and determine whether the country will flourish or flounder as a standalone nation.

Early indications, however, have shown some promise. In the two weeks following B-Day, both the FTSE All Share and the FTSE 100 have risen by almost 2% reaching 4,135 points and 7,409 points, respectively (correct as of close of trading on Friday, February 14, 2020).


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The nine-month decline in the UK’s manufacturing sector also appears to have stopped in its tracks. The latest Purchasing Managers Index data for January came in at 50, showing neither growth nor decline for the first time since April 2019.

The figures, which are based on a survey of 600 manufacturers, revealed that employment in the sector had stabilised and optimism had reached an eight-month high. The market is hotly anticipating the release of February’s data, due out next week, but the earlier flash indicators suggest a continuation of the uptick.

The data paints a positive post-Brexit picture, but this isn’t the only good news to take place.

Japanese car maker, Nissan, reportedly drafted contingency plans to pull out of manufacturing in mainland Europe should a trade deal see tariffs imposed on car exports. Instead, the car maker would ramp up production in the UK and focus on selling more cars this side of the channel – potentially boosting its market share in this country from 4% to 20%.

However, for the moment, as the dust settles, big businesses are still formulating plans based on myriad different trade-deal outcomes and the success of the national economy will very much rest on what these companies decide to do.

With a reshuffled cabinet, new Chancellor and a potentially delayed budget, all eyes are on Number 10 and 11 for their next bombshell. The announcement of new tax breaks or rises, trade deals, agreements or diplomatic incidences could either boost or stall a resurgence or slump of the post-Brexit economy.

There are still plenty of unknown unknowns for UK investors.

What is clear, however, is that January 31, 2020 marked the UK’s adventure into uncharted waters and for now, at least, anything might be possible.


Your capital is at risk.

 

Past performance is not a reliable indicator of future results.

Your capital is at risk.

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