• 16 December 2019
  • 10 minutes

Brexit might begin, but will it end?

In a November 2019 roundtable, Marcus Brookes, Keith Wade and Jon Wingent took part in a discussion led by David Ryder in which the outlook for 2020 was investigated. In this extract, we consider the likely outcomes of the election and how Brexit might play out.

DR: Keith, what do you think’s going to happen with Brexit?

KW: A lot will depend on who wins the election. If the Conservatives were to win an outright majority, I would expect the existing Brexit deal to be pushed through. Any other outcome leaves uncertainty which could well be resolved by another referendum.

DR: Even if it’s a full majority Labour government?

KW: Yes, because Labour has got a real problem about whether or not to support Brexit. I think the only way they would be able to resolve it would be to have a referendum, and put the question back to the country.

DR: If it came to it, do you think the European Union would grant another extension to Brexit?

KW: If there’s a change in government, another extension might be necessary even if it’s just to allow time for a referendum and for the new government to plan its strategy. The sources that we have in Brussels suggest that the EU does not want to be responsible for forcing a hard Brexit. So I think it would be granted.

DR: Marcus, do you think that there’s a case that the French might dig their heels in again and say “no more extensions”?

MB: I don’t think so. I think when President Emmanuel Macron was making statements about “this has to be the last extension” he was really talking to the French people. He’s got a few domestic issues so he wanted to be seen as a tough statesman. Going back to the UK political area, I think it’s interesting how well the Liberal Democrats are doing at the moment. There appears to have been a shift in the middle ground towards the Liberal Democrats. So we might end up with three parties that split the vote, leaving us with a hung parliament. And that would leave the Brexit conundrum going on and on.

DR: How do you think ordinary investors are reacting to this?

JW: Most clients that I hear from are feeling exasperated. The saga is about to enter its fifth calendar year, so there seems to be more support for some sort of conclusion to it all. An interesting point of note is that if you were 15 in 2016, you would not have been of voting age in the original referendum. If we were to have another referendum which is possible barring a Conservative outright majority, then the new younger voters might influence the outcome.

DR: As Jon points out, the Brexit saga has started to become more of a medium-term issue rather than a short-term one. How is that affecting investment decisions that you’re making?

MB: We have been cautious about the implications of Brexit for the past two years. The portfolios that we manage reflect that. One of the main areas that we were concerned about was the sharp changes in the value of the pound relative to other currencies. Given that our clients are mostly UK citizens with UK assets and UK liabilities, the value of the pound is a very real and necessary instrument to consider.

So all of our portfolios have had a reduced allocation to UK stocks and bonds. That said, since spring of 2019 we have been slowly increasing the allocation to UK assets as the Brexit outcome appears to have become slightly clearer.

Round table attendee biographies

David Ryder, Senior Investment Writer and Analyst

Schroders Personal Wealth

David has been leading the production of investment commentary at Schroders Personal Wealth (and before that for Lloyds Private Wealth) for more than four years. His 25 years of experience include publishing, broadcasting and journalism across a range of financial and investment topics.

Marcus Brookes, Chief Investment Officer

Schroders Personal Wealth

Prior to his role in Schroders Personal Wealth, Marcus was Head of Multi-Manager at Schroders from 2013 with responsibility for the Schroders multi-manager team and investment process. Marcus has over 25 years’ experience within investment management, specialising in manager selection and asset allocation.

Jon Wingent, Head of Investment Specialists

Schroders Personal Wealth

Jon Wingent has been Head of Investment Specialists since September 2016. Jon heads the investment specialist which supports colleagues and clients with subject matter expertise on investment related matters. Before joining us, Jon was an investment director at Close Brothers Asset Management. He has 17 years’ experience in the investment management industry.

Keith Wade, Chief Economist

Schroders plc

Keith is responsible for the economics team and the Schroders house view of the world economy. He is a member of the Group Asset Allocation Committee. He joined Schroders in 1988, before which he spent four years as a research officer at London Business School.

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