Brexit: ‘As predictable as the British weather’ one year since referendum

The outlook for Brexit is “about as predictable as the British weather” one year since the referendum in which the UK voted to leave the European Union.

Overall, the UK voted 51.9 per cent to Leave the EU and 48.1 per cent in favour of Remain, although in Scotland, Northern Ireland and London the majority voted to stay.

Sterling has taken the biggest hit since the vote down 13.8 per cent against the US dollar and down 12.5 per cent against the Euro.

While market predictions in the case of Brexit were bleak ahead of the vote, weaker currency has benefited the FTSE 100, which has delivered 22.6 per cent, although the slightly more domestically focussed FTSE 250 has also delivered 17.2 per cent since the vote.

“The performance of capital markets over the last year tells us that the financial effects of Brexit are about as predictable as the British weather,” says Laith Khalaf, senior analyst at Hargreaves Lansdown.

However, the weaker pound has also meant companies servicing the domestic consumer have been hit.

“Dixons Carphone, Travis Perkins and Berkeley Group are three companies who can attribute a large part of their relegation from the benchmark FTSE 100 index to concerns over consumer demand stemming from Brexit,” says Khalaf.

Currencies, gilts and interests rates – June 2016 vs June 2017

GBP/USD

1.4877

1.2629

GBP/EUR

1.3072

1.1343

Chance of UK interest rate rise by 2018

86.1%

20.4%

10 year gilt yield

1.4%

1.0%

Average cash ISA

0.87%

0.41%

Source: Bloomberg, Bank of England

The trajectory of Sterling from here on divides City opinion between those who fear a messy Brexit and political certainties will continue to weigh on the Pound and others who argue Sterling has been oversold, says Tilney Group managing director Jason Hollands.

For those want UK equity funds with high international earnings, Hollands recommends CF Lindsell Train UK Equity, AXA Framlington UK Select Opportunities or Evenlode Income.

UK equity funds that have greater exposure to domestic companies include Standard Life UK Equity Income Unconstrained, Woodford Equity Income or the Henderson Smaller Companies Investment Trust.

Khalaf adds the closed-ended property fund sector has regained its composure since large-scale redemptions caused many funds to become gated.

However, he says the episode served to reiterate the significant drawbacks of investing in open-ended commercial property funds.