BREXIT AND INVESTORS

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In recent months, the UK has included analysis for different scenarios of a no deal Brexit.  

After the UK voted to the EU in the 2016 referendum, British stock markets and the value of the pound sank and we saw the massive selling of well-established companies.Home builders, actions of airlines, cars and banks were especially affected.

However, there has also been many winners in this situation. Basic consumption behaved well and Companies started to diversify their incomes with low volatility. On the other hand, companies that earn their income abroad like oil or gas companies, have received support from investors. 

This is primarily for two reasons. On the one hand, the success commercial operations do not generally depend on the domestic situation in the United Kingdom. On the other, a weak pound makes their income abroad worth more when converted to pounds.

It seems that there will not be a hard Brexit, but what would happen if there is? It is impossible to predict but it seems logical to think of a scenario similar to the one we have experienced in the last years. Certainly, social bewilderment would be high, and domestic exposure would be the most affected, while Internationally supported companies will be strengthened given the high chances of expanding and improving agreements by removing EU restrictions in order to achieve long-terms investment projects.

Many UK companies like residential builders will not feel a difference, as the need to build more house in the United Kingdom does not depend on the EU and this need will continue, regardless of Brexit. 

DonĀ“t get me wrong, there will be casualties along the way.The pound will be weakened and cost on businesses will increase specially for companies that base their relations with the EU and as consumers we might experience lack of some products.

Not only do we have to wait and see if the last agreement is accepted, but the transition period to complete.It is relatively short and some experts say that closing a deal on 31 December 2020 would be unprecedented, even with an agreement.If the transition period expires without completing the agreement, it would be like facing a hard but somewhat mitigated Brexit given the preparation afforded to UK companies.

At the moment, the Brexit has been postponed, and there could be a possibility for another referendum, nothing is guaranteed.

However, any of these results could lead to a rise in British exchanges. We have to be very aware of the market in the coming months and attentive to opportunities as they arise.

Graham Hughes, accountant.

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