Judgement day

21 March 2019

2 minute read

Brexit has shaved off roughly 2% from UK gross domestic product – a non-trivial sum for a two-trillion-dollar economy. What does the future now hold for investors?

Who's this for? Confident investors

What you’ll learn:

  • The cost of Brexit to the UK economy
  • The likely future impact of Brexit on UK industries
  • What the future holds for investors

Every new piece of information on the UK economy is perceived as telling us something about the likely success or failure of the Brexit vote. Interestingly, polls tell us that neither side is in a hurry to change their minds on their initial vote back in 2016, in spite of the outcome so far bearing scant resemblance to either side’s campaign trail promises.

Missing GDP

Some economic output has no doubt been lost as a result of the ongoing and arduous negotiation process with the EU. Various studies have pointed to the fact that the UK appears to have missed out on a surprising boom in international private sector activity through 2016 and 2017 as a result of the referendum vote. By comparing current growth rates in the UK to its historical relationship with the output path of its major trading partners, these studies have shown that Brexit has shaved off roughly 2% from UK gross domestic product – a non-trivial sum for a two-trillion-dollar economy.

However, many UK industries may find life unchanged after the EU referendum. Some may even find their situation improved. The net effect, once the dust has settled, is likely to be an economy that will survive but with a slightly worse growth trend than before the vote.

To-do list…

There is a long to-do list for the UK authorities, much of which has little to do with Brexit. Nevertheless, much of our economic fate will continue to come from our major trading partners, who will remain in Europe no matter what the shape of the eventual trading terms.

Investment conclusion

We’ve surely written and spoken as much about Brexit as any sane person can possibly absorb. The jury will remain out for some time on the eventual costs and benefits of the Brexit referendum decision. Happily, investors need not wait for the final outcome to be known. The industrial revolution currently underway is the only incentive investors really need to invest in the diversified capital markets the world has to offer. Inflation-beating returns for the patient, and optimistic, investor lie in wait. These are our current opinions but the future, as ever, is uncertain and outcomes may differ. Investments can fall in value as well rise; you may get back less than you invest.

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The value of investments can fall as well as rise. You may get back less than you invest. Tax rules can change and their effects on you will depend on your individual circumstances. Smart Investor doesn’t offer personal financial advice. If you’re not sure about investing, seek independent advice.

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