Is Now the Time to Invest in a Post-Brexit Economy?

Gemma Rawson |

Before the UK made its decision to exit the EU, market forecasts were full of doom and gloom. Those economic forecasters in favour of the UK remaining in the Union predicted that a decision to split from it would lead to a dramatic recession: increased levels of debt for British families and British businesses, in conjunction with higher prices for everyday goods, for freight, and an overall higher cost of living. Now, however, we are beginning to come to terms with the realities of what a post-Brexit economy will look like, and for those new to the world of equities and investment, now could well be the time to make some savvy investments.



An Official Drop in the Risk of Recession

During testimony to the House of Lords last week, the Governor of the Bank of England Mark Carney revealed that the risk of a UK-wide recession as a result of the Brexit decision has dropped significantly since the decision was made in June. In a Bloomberg report, Mr Carney is reported as stating: “In light of all the events since the referendum, since the evening of the 23rd, I’m absolutely serene” This is due to both the Bank of England’s risk-reducing measures, introduced as soon as the Brexit decision was announced, and the markets continuing to thrive in a way that was not forecast since June. The UK economy has remained unexpectedly resilient, and this trend is expected to continue for the foreseeable future, particularly as the country has yet to make any decisions about its Leave decision, or put a universally agreed exit timeline in place. So is now the time to begin making bold investments in the post-Brexit economies? Several highly regarded forecasters believe that it is.

Time For Savvy Investments?

Whilst the forecasts around Britain’s traditional industries were largely correct and manufacturing output has fallen month on month since July, other equities are seeing an increase in strength. It is important to note that the British manufacturing industry was waning long before the decision to leave the EU was reached, despite this being a key focus of the remain campaign. Two thirds of British consumers now believe that Britain’s decision to leave the EU was the correct on, and as a result, consumer confidence is steadily on the rise. Investment in the services sector has also seen its biggest rebound in almost 20 years. If you’re looking for a solid investment opportunity then choosing a single country ETFs is likely to be the most stable investment with the highest long term yields.

Britain’s decision to leave the EU is expected to lead to other leave or remain referendums across Europe, and as the European Union slowly devolves (as some experts are forecasting) and other economies face the same issues that the British economy has faced over the past four months, the British economy should only continue to increase in strength. Of course, this is based on several suppositions that may not evolve, but it seems likely that this will all lead to good news for the British economy and for those brave enough to choose to invest in it now.

The fact is that the economic future of the UK remains muddled: some believe that a recession will still hit but that it has simply been postponed, while others believe that the Brexit decision will encourage growth within the economy. For individual homeowners and small business owners this confusion means many are preparing for the worst: steeling themselves for increased costs, increased outgoings, and increased levels of unexpected debt. There has been no official prediction of the direction this decision will now take the UK, and there is now other international precedent of this kind of action for us to follow. But what we do now is that negative pre-Brexit forecasts were hugely exaggerated and that the economy is currently continuing to thrive: if you are prepared to take a risk and be bold, therefore, there seems like no better time to do so.

Written by Gemma Rawson.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

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