A full English Brexit
October 12, 2020

A full English Brexit

Paul Jackson. Global Head of Asset Allocation Research and András Vig. Multi Asset Strategist

Already challenged by the Brexit process, the last thing the UK needed was a global pandemic and it seems to have suffered more than other countries (see chart below). 

The Brexit process is coming to a conclusion. Financial markets have already passed judgement, with sterling failing to recover after slumping in 2016 and UK equities not reaping the usual benefit from such depreciation.

The path of the pandemic is of greater importance but we believe the effect of Brexit on UK assets depends on what sort of deal is agreed with the EU ("full-deal", "compromise" or "no-deal"). We outline our expectations for each case.

We believe the balance of probabilities favours sterling and UK risk assets but the chances of a "no-deal" outcome are uncomfortably high. 

The fact that Brexit is a very English phenomenon suggests there is a long term risk to the union of the United Kingdom, with Scotland and Northern Ireland the most likely candidates to leave. Just as we always face ridicule when investment choices backfire, the UK government could end up with egg on its face.

Read our in-depth assessment here.

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