According to deVere Group CEO, Nigel Green, investors are likely to dump UK assets before the Brexit negotiations take place.
Green’s comments follow the announcement by British Prime Minister, Theresa May, on the timetable to commence negotiations. She indicated that she would trigger Article 50, the clause needed to start the Brexit process, by the end of March next year.
“There’s an uncertain road ahead for the UK in the run-up to Britain’s formal divorce proceedings with the EU. Until the talks start, there will be no clear answers to the important questions about the UK’s future relationship with the EU or the rest of the world and this is going to create ongoing uncertainty,” Green said.
“This uncertainty suggests a higher risk for investors and it can be expected that as a direct response many will dump UK assets as a precautionary measure.”
According to Green, this trend has already manifested itself, with the sterling having weakened to a three-year low against the euro and its lowest level against the dollar since the beginning of July on Monday following May’s announcement. “It’s a trend that will likely gain momentum as the start date for negotiations draws nearer.”
Property market to remain immune
One asset class that is likely to remain largely unaffected is UK property, Green said, noting its high demand by UK and overseas investors primarily due to the ongoing fundamental strengths of British residential property investments and because of the fall in the value of the pound.
“In contrast, investors are now more likely to increase their exposure to other international markets. Broader geographical diversification should be championed. Investing across geographical regions is an essential part of a well-diversified portfolio, and puts individuals in an optimum position to mitigate risk during times of market volatility, and make the most of the inevitable opportunities that present themselves,” he explained. “Investors will be rebalancing away from the UK in favour of global stocks, bonds and perhaps property too.”