Since the EU Referendum on the 23 June UK investors have had much to cheer. The value of their investments has risen contrary to the expectations they had regarding the likely impact of a vote to leave the EU. Interest rates have been cut and the Bank of England has announced more stimulus measures which, while disappointing for savers, has further encouraged rises in asset prices.
Economic data has been more positive than expected with the recent GDP figures well ahead of expectations for Q3 – indeed investors will welcome today’s increases in growth forecasts from the Bank of England.
Recent increases in share prices – particularly in the FTSE 100 – have been in part driven by the fall in value of Sterling, increasing the value of overseas earnings and profits. Investors will be hopeful that this will lead to increases in dividend income in the months ahead.
Clarity and certainty
As with any event, all personal investors really want is clarity and certainty. To that end they will be disappointed by the High Court ruling on the triggering of Article 50 as it is likely to lead to increased delays, uncertainty and market volatility. Indeed Sterling has risen sharply and share prices have fallen following the judgement.
We would call on the Government to do all it can to provide certainty for investors. This may mean accepting the judgement and ensuring the parliamentary hurdles are brief and cleared as efficiently as possible, rather than a protracted legal battle. Any suggestion of reopening the Referendum decision or holding a second Referendum should be extinguished as this would add incalculable uncertainty when the will of the people has already been expressed and a majority of our personal investors clearly indicated they wanted to leave the EU.
We would like to see the Government moving forward with planning for international trade deals – convening a summit of Commonwealth nations for example. Understanding the approach which will be taken to Single Market Access and Immigration Controls is important as these two appear irreconcilable.
Priority
To have a clear indication of the sense of priority the Government gives to these competing challenges would give a clear signal to the market of the likely outcome. It is worth observing that the fall in Sterling since the vote means that in almost all cases, even with the imposition of World Trade Organisation tariffs, the UK’s exports are still more price competitive than they were before the EU Referendum.
We would also call on the Government to ensure that in its upcoming Autumn Statement it reiterates its commitment to personal investors including reaffirming the increase in the ISA allowance in April 2017 to £20,000, the introduction of the Lifetime ISA in April 2017 and its commitment to maintaining the reduction in Capital Gains Tax which was effective from April 2016.
In short, personal investors want clarity and certainty. Anything which can be done to expedite the process of leaving the EU over the next two and a half years, accelerate trade negotiations, boost the UK economy and encourage investment will be welcomed.
On the contrary, hurdles erected to delay that process and anything adding to uncertainty and market volatility will be a concern and will negatively impact investor sentiment.
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