Brexit and affluent British investors
Uncertainty and Caution are widespread
21 March 2019
200 verified Affluent & HNWIs from UK with at least £400,000 in Investible Assets were asked about their views on Brexit and how it might affect their finances. Survey in field from 15-20th March
Brexit and affluent British investors
British, and indeed international, news reports continue to be dominated by Brexit as the official deadline day rapidly approaches. The past week has been particularly turbulent in the House of Commons, with Parliament expressing their views on several Brexit-related votes and making a ‘No Deal’ Brexit unlikely. That the default position of a No Deal Brexit remains in place is an unusual scenario given that it would benefit nobody. An increasing possibility is that the UK does not leave the EU on 29th March 2019 as originally planned and a delay of a couple of months, years or even a cancellation may occur.
To understand how this could be impacting wealthy Brits, Altiant conducted a survey in March 2019 among 200 of our UK affluent/High Net Worth Individuals (HNWIs) who had at least £400k in investible assets. Among these, 70% said that they use a professional advisor for investment-related decisions. Our sample are prolific investors overseas, with 36% having 25% or more of their assets invested abroad and 47% saying that they own one or more properties in the EU:
“Do you currently have any assets invested abroad? If so, what percentage bracket is most applicable to you?”
More than a third say they are worse off since Brexit was announced
We firstly wanted to know how the UK’s decision to vote to leave the EU had affected their finances from 2016 to now. While 43% said that their finances were largely unchanged, more than a third (35%) felt they were worse off, compared to only 22% saying they been positively impacted.
Focusing on the past year alone, 45% of the survey respondents said that they had not rearranged their investment strategy or portfolio according to the initial March 29th deadline. However, 55% had made provisions, 24% doing so independently and 31% with the help of a financial advisor or wealth management company. Others said that they were simply waiting for clarity before acting:
“I can’t speculate on the effect until all of the facts are known, and will take the necessary actions when the situation is clearer.”
“I'm uncertain what the impact will be and will react to events as they occur. I don't think anyone can be certain of the effect on markets.”
“Do you think the UK will actually leave the European Union as a result of these negotiations?” / “And do you hope the UK leaves the European Union as a result of these negotiations?”
Uncertainty and a potential lack of financial assistance appears to be reasonably widespread, as a third felt that they had not received enough advice to manage their finances since Brexit was announced (compared to 55% who felt they had received enough advice). This uncertainty provides opportunities for financial advisers as half of our survey respondents (51%) say that a postponement would encourage them to get professional advice on managing their finances:
“Have you received enough advice to manage your finances since Brexit was announced?”/ “Article 50 for the UK’s potential exit from the EU is now likely to be postponed and no longer occur on 29 March 2019. Would this decision encourage you to get professional advice on how to manage your finances until the revised date?”
Many investors could emigrate or shift investments in the event of Brexit
If the UK does implement Article 50 to leave the EU, 23% of our sample say that they would consider emigrating, with a further 18% unsure (or prefer not to say). Regardless of their future location, many say that Brexit would have significant impacts upon their businesses and portfolios. Some of this sentiment is reflected below:
“I will be moved to a US or EEA location to conduct business…it presumably impacts income from investments.”
“It will cause chaos for me both professionally and personally. I have had to open offices in Germany and shall not make any substantial further investments until I know when, and upon which terms, we shall be leaving.”
“I am in the process of obtaining a passport from an EU member state and therefore and hoping to limit any potential impact on my portfolio.”
“I will be unhappy if the UK leaves the EU and it will impact me negatively both intellectually and financially. I would anticipate rearranging my portfolio with a view to investing outside the UK as I do not view the UK's prospects favourably upon leaving the EU.”
Investment flight, a real possibility if Brexit happens
We finally posed a series of questions to start to explore the potential for further investment flight via the following scenario:
“Assume you have £100,000 to invest and there are two identical companies, one of which is based in the UK and the other is in the EU. Both companies would provide a 10% annual rate of return. Which company would you invest in?”
Encouragingly for the UK, 46% stated that they would invest in the British company while 26% selected the European company and 28% had no preference.
We then investigated various scenarios where the rate of return was not equal to try to discern the cost of being loyal to British based investments. While we continued to observe some degree of loyalty to British investments at unequal levels, many investors will chase outperforming returns wherever they can be found.
This should signal to the administration that if Brexit does make British companies less competitive internationally, investment flight from the UK and foreign investment into the country could be adversely and quickly impacted.
The potential flight of private British capital could create a long-term, self perpetuating vicious cycle in the UK economy which will be difficult to break out of. To counter this, the May administration will need to place significant emphasis on job creating foreign direct investment.
Uncertainty likely to persist for the next week…and maybe much longer
At the time of writing, the EU has said that it will only grant a short extension to the Brexit deadline if the British Prime Minister can pass her Brexit deal before 29th March. A revised Brexit deadline of May 22nd or June 30th seems increasingly likely. Whether this happens or not remains to be seen, with the uncertainty continuing to play havoc with groups such as our affluent UK investors.
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Chris Wisson, Knowledge Director
Lars Long, Founder & CEO
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