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What’s the economic outlook for the British economy post-Brexit?

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The UK economy is set to enter uncharted waters with Brexit on the horizon on January 31st, 2020. Britain has however already experienced the ‘Brexit effect’, with car manufacturers and other industries taking their business elsewhere as a result of Britain’s decision to leave the EU. Hopefully some of the choppy waters are already behind the UK.

With Boris’s Conservative majority won, meaning Brexit is now definitely in the bag, predictions for the economic outlook post-Brexit are mixed, from a pessimistic prediction of recession to a booming British economy. The only question that remains to be answered is – deal or no deal?

If a deal is struck, the UK will aim to break a bespoke trade deal, rather than following Norway’s lead of having EEA membership, or a Swiss model of a series of bi-lateral trade agreements. The alternative is a ‘soft’ Brexit, which means remaining in the Customs Union. The EU does not seem keen to agree this route, as it would mean the UK gets to have its cake and eat it too – benefiting from the Customs Union while also being able to strike trade deals with other countries independently.

To summarise how this might impact trade in a range of sectors, there are a number of different factors that currently hang in the balance. To gain an overall view of how well or otherwise different sectors are performing, online trading platforms such as eToro can help investors gain a birds-eye view of performance as we continue to negotiate the sometimes rocky road to Brexit. Insights on different aspects of trading will be provided for you as well as the possibility of trading stocks, cryptocurrencies, commodities and currencies. Many different types of assets are available on the platform, guaranteed to seduce many investors wanting to invest their money.

With 49% of UK trade currently in the Eurozone, and 11% with countries that have trade agreements with the EU, and 40% with non-EU countries, Brexit is going to cause significant ripples across a range of sectors for some time to come.

 

Fintech

The UK and London in particular, is booming when it comes to growth in fintech, with investment in this sector doubling at the beginning of 2019. The UK is bucking the trend for a decline in fintech, and experts predict investment in the sector could plateau in the near future. Brexit may test how willing investors are to invest in fintech, as CBI Data demonstrates fintech deals backed by venture capitalists have dropped to levels seen in Q4 2016, just after the EU Referendum. Investment in fintech start-ups is buoyant at the moment though, up 45% on 2018 figures. London continues to dominate the market, with 90% of fintech investment focused there. In the past five years, the UK fintech market has struck more deals that the other nine European countries that are active in this market put together, with 1,277 deals agreed since 2014.

 

Cryptocurrency

Some non-EU countries such as Switzerland are embracing the potential for economic growth that cryptocurrency and blockchain technology represents and are particularly crypto-friendly in comparison to their EU neighbours. Spain, France and Germany all take a more cautious approach when it comes to cryptocurrency, although as it starts to gain momentum and become more mainstream, steps to regulate it are being taken. In France, the AMF is hoping the rest of the EU will follow its lead in adopting a voluntary code of practice framework, addressing consumer protection, capital requirements and tax mandates.

At the moment there is no regulation in the UK for cryptocurrency, as it is not recognised as legal tender, but the Bank of England has recognised the need for regulatory measures to be put in place. Whether the UK will also mirror France’s approach, along with the EU, or develop its own independent set of rules regarding cryptocurrency remains to be seen.

 

Commodities

The trading of commodities is one conundrum that could be set to cause the UK a headache as it prepares to leave the EU. Market regulations of commodities such as energy supplies are heavily tied up in EU legislation, which will need to be reviewed in light of Brexit. In times of economic and political uncertainty as we have seen recently though, commodities such as gold and other precious metals do well as a safe haven for investors who may want to limit their exposure to fluctuations in stocks.

In the event of a no-deal Brexit, UK based trade platforms would be classed as third country venues, which would in turn change how commodities are traded, and how rules linked to market regulation are applied.

 

With the Conservative majority vote in the bag, there’s no going back. The UK is now set on clear post-election course of delivering Brexit by January 31st, however there is still much work to be done to gain clarity on many aspects of trade. The 31st January may well be just the beginning of a long voyage to Brexit ahead. It will be interesting to see how things develop in the future.

 

 

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