Big institutional investors think Brexit will change their operating models but are determined to hold on to UK assets despite fears of a slowdown, according to a new survey.
Of the institutional investors surveyed by State Street for its new “Brexometer” poll, 80 per cent expect Brexit to impact their operations, as the UK faces uncertain trading arrangements and the possibility of an entire new regulatory regime once the UK has left.
However, almost two-thirds of investors expect to hold on to their UK assets, including bonds and stocks, over the coming six months. UK stocks in particular may have been boosted by the devaluation of sterling by around 17 per cent since the referendum.
Michael Metcalfe, head of global macro strategy at State Street Global Markets said, “At just over six months removed from the UK’s EU referendum, markets seem to have mostly moved on.”
Growth has been steady since the election, defying predictions of an immediate hit to the economy, with the sterling shock so far the most dramatic indication of a fundamental change for the UK’s economy.
“Thus far at least, the extremely gloomy pre-Brexit predictions for the UK economy and asset markets look well off the mark,” said Metcalfe.
That could be about to change, however, with 48 per cent of the investors surveyed expecting a drop-off in investment in the next quarter.
This belief echoes predictions by the Bank of England that the steep rise in inflation will serve to dent consumer spending. UK consumers have continued to spend strongly, in part driven by an increase in debt, which prevented an immediate slowdown post-Brexit.