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What Effect Could “Brexit” Have on Investors & UK Growing Businesses? PDF Print E-mail
Wednesday, 22 June 2016
“Brexit” is one of the biggest decisions that we are facing to date. The UK public have been given a huge choice in whether or not we stay in the EU, or decide to leave. Many people seem to be stuck on the fence in their decision and it’s easy to see why. There are many different takes on “Brexit” and what could happen, from a personal view, a business view, SME’s, healthcare etc. We are going to take a look at what effect it could have on investors if Britain does decide to leave.

A lot of the concern comes down to the pound and what could happen. Projections have shown the pound could be likely to drop by 15% immediately against the dollar and also the Euro to fall too if an exit happens. HCBC’s chief economist Simon Wells and put together a piece “What If It’s Leave” which includes detailed forecasts on the case. They are forecasting that if a 15% plummet in the pound does take place, as well as a drop in the Euro; investors will be likely to sell stocks of. It could mean that we see Investors shift to different forms of investment, such as debentures, bonds or even alternative finance such as equity & debt investments.

Simon has also said that he believes the Bank of England will have to step in to provide liquidity to the market if there happens to be a drop in foreign investment into the pound and also a drop in US dollars. HSBC have stated the expect inflation to jump up 1.5% from 3% to 4.5%. This is especially bad for savers if they are only looking at interest rates of 0.5% in Cash ISA’s. This would be a good time to look at a possible switch to IFISA’s which project rates of around 6% interest, higher than the inflation rate. Savings account and other investments will also take a hit from this and drop in value. Do remember if you are considering a switch to alternative finance, make sure you consider the risks as these are high risk investments and your capital can be at risk. Many providers however have a provision fund to support investors.

If investors decide to move their cash away as a result of “Brexit” we are likely to see a huge dip in the FTSE 100. If the pounds value has to be dropped in order to keep foreign investment, the cost of imports will rise, meaning higher costs for businesses trading internationally. SME’s and growing businesses trading outside the UK will see costs rise and due to the lack of certainty in the trading market, businesses seeking investment maybe avoided for the time being.

However, it is not all bad and I am trying to sway away from creating any fear. Investors making a switch in investments could mean we see more alternative finance investments and further growth for the market. Investors may be more inclined to take a look at equity investment into UK businesses or debt investments and lend out their money via peer-to-peer. It really is a huge decision that is going to have repercussions. It’s hard to tell exactly what these will be and what the exact effects will be, but if we go by Simon Wells’ forecasts, it would not be great for growing businesses and investors. Have you made your decision on “Brexit”? Comment and let us know your opinion.

Lee Nicolaou

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