January 2021

We asked our partners, Asset Intelligence, to share their immediate reaction to the Brexit deal. As the dust settles and the detail becomes clear, we'll come back to this topic.

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The last-minute striking and implementation of a deal on the trading relationship with the European Union is unalloyed good news for investors. With some caveats, the arrangement preserves zero tariff, zero quota trade both ways; allows the UK to continue to participate in some EU arrangements deemed to be of benefit and preserves shorter-term visa-free travel for tourists on both sides. 

The primary benefit of the breakthrough is that the considerable uncertainty which has hung over the UK market for the past six years has now died down. (A referendum became inevitable when David Cameron won the 2015 general election.)

Thanks to the continuing rumbling possibility of a no-deal Brexit, foreign investors came to see the FTSE has something of a ‘black sheep’ among global markets over the past few years, with many selling off their shares. The good news is that this means the market now looks attractively valued relative to the bourses of many other major developed economies. With a stable trading relationship now in place, there is certainly opportunity in the market from here.

Finally, this is not to say that the deal is perfect or that businesses will not see disruption. Indeed, by all accounts we already are. Particular pinch points so far seem to have been experienced by exporters of agricultural and fishing products; smaller traders struggling with the new rules; and the new barriers imposed between Great Britain and Northern Ireland.

Clearly, these issues are not ideal for the businesses involved or the economy as a whole. However, in market terms, it has little relevance. With a deal in place, investors at least understand what businesses have to deal with. The new environment will have already been priced in at this stage and most businesses will gradually adapt to the new relationship. 

The crucial takeaway is that a reasonable deal is now in place. The one thing it is often said that markets hate most – uncertainty – has now been lifted.