Two years on from the Brexit vote the gap in performance between internationally and domestically focused UK-listed stocks is at a record high as the weak pound takes effect.
Research by accountancy firm KPMG shows that an indices of 50 FTSE firms that derive more than 70 per cent of their income from abroad (non-UK 50) had gained 35 per cent since the vote.
An indices of the largest FTSE companies that derive more than 70 per cent of their revenues from the UK (UK 50) was four per cent below the level it was at two years ago.
The main contributor to the difference in performance has been the pound’s exchange rate which in trade weighted terms is still down 11 per cent since the referendum, increasing the relative value of foreign earnings, benefiting companies that own significant amounts from overseas.
Adjusted to remove the impact of the pound, the performance of both indices has been poor over the period.
Comparing the value of both indices in US dollar terms against the FTSE all world index, which covers around 7,400 securities in 47 different countries, shows that the value of UK listed-companies is valued less highly by investors, irregardless of where their earnings are derived.
Since June 2016, the value of the FTSE all world index has risen by 25 per cent, versus 20 per cent for the non-UK 50 and -15 per cent for the UK 50, all in dollar terms.
KPMG said it anticipates a mixed outlook for the next year. It expects the pound to remain relatively weak, but says an escalating trade war could hurt many of the non-UK 50 constituents. It says these companies are also more vulnerable to a “cliff-edge” Brexit as they tend to have supply chains which are more deeply integrated with the EU.