Back in May 2016, we ran a series of polls with active investors focusing on what effect Brexit might have on the UK economy. Whilst the poll showed a difference of opinion between age groups, genders and wealth brackets, overall, it was clear that the majority (39 per cent) felt the UK would be worse off outside of the EU. Only 36 per cent believed the UK would be better off with 25 per cent undecided at that time.
The result of the poll, whilst inversely reflective of the referendum result, was just as close.
With the UK yet to come to any definitive deal with the other EU member states and the lack of clarity as to what a ‘deal’ might look like 19 months down the line, news and opinion surrounding the UK’s exit and future prospects has been varied. Some staunch ‘Brexiteers’ have been seemingly unfazed by negative reports and some ‘Remainers’ have campaigned for a second referendum.
Whilst a ‘deal’ is yet to be set in concrete, with many industries left in limbo as to how they will need to operate and function post Britain’s exit-proper, it is interesting to gauge investor sentiment in the midst of the ‘unknown’.
At the end of last year, we revisited the question of how the UK economy might fare after Brexit. We asked a core group of 140 active end investors (across age, gender and wealth):
‘Now that the Brexit negotiations are underway, do you believe that leaving the EU will have a positive or negative long-term effect on the UK economy?’
The results were interesting. The largest group, representing 29 per cent of respondents, felt that leaving the EU will be positive over the long-term, even with no deal. While the second biggest group at 28 per cent believe that leaving will be negative long-term, regardless of any deal made. The net negative and positive figures seem to take a very different form when you factor in a deal which includes access to a single market with the net positive figure rising to 45 per cent and the net negative to just 39 per cent.
However, let’s analyse the net positive vs net negative effects, only looking at the responses which do not require any ‘deal’ conditions (so excluding the group believing leaving will be positive only with access to a single market).
We can now see that 39 per cent still believe that the UK will be worse off outside of the EU with no deal or any deal whereas only 36 per cent believe we’ll be better off under the same conditions.
Recognise those figures? Precisely the same as our poll taken ahead of the referendum vote in May 2016.
In other words, despite the UK having made what looks to be very little progress in terms of a deal with the EU, it seems not to have dented investor sentiment at all. Though factor in a deal involving access to a single market and overall positivity trumps negative.
Sentiment, of course, on its own, can’t necessarily have a positive effect on an economy though as we know well in financial services, it can be powerful enough at times to move an entire index. Still, until a more detailed plan emerges, we all have to wait with baited breath to see what a Brexit ‘deal’ looks like and what that means for the longer term prospects of many of the UK’s industries’ to see how sentiment might swing in the future. Watch this space…
Dawn Hyams is head of investment insight at consumer research consultancy The Wisdom Council.
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