Brexit. The term sends chills down the spine of many investors for its continued disruption of the UK’s stock market – but it could hold significant value to those willing to look closer to home.
One the face of it, the many months since the UK’s vote to leave to the European Union have been confused at best, and Brexit continues to pile on the pressure.
The vote saw the UK’s economic prospects downgraded by global financial institutions and the outlook for earnings that would be made by companies listed on the London Stock Exchange were cut, too.
Brexit has had a harsh impact on UK-focused domestic stocks such as housebuilders, banks and life insurers, while those that source revenues outside of the country flourished – pharmaceuticals, tobacco stocks and consumer staples, for example.
But nothing remains the same and with the Brexit divorce party booked for March 29, focusing on the nation’s needs could boost investment returns from companies that will have to meet them.
The food and drink industry currently accounts for 16% of the UK’s manufacturing sector. Leaving the EU is likely to force us to import less and increase our intake of home grown produce. Cheddar over Camembert, for example; raspberry jam over rice cakes.
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Almost half of food manufacturers have said access to new UK markets will form a significant part of their growth strategies, with a further 46% citing export markets.
Looking at the construction sector, housebuilders have suffered dramatic falls over the past two years and many in the City think their share prices cannot go down much further. While it is fundamental within this sector to consider each company’s valuations and balance sheets, there could be value found in home-grown construction firms post-Brexit – especially with the Chancellor promising to build more homes.
Technology will also continue to play an ever-increasing role in our daily lives, regardless of a good, bad or no deal Brexit.
For investors, a focus on tech could naturally lead to US-based firms like Apple, Facebook or IBM – but there are UK-tech stocks worth considering.
The KPMG UK Tech Monitor Index reported an upbeat outlook for the UK tech sector as companies have buoyant staff hiring and capital expenditure plans in place for 2019.
As the Brexit dust settles, it is becoming increasingly clear that there has been a weaker impact on UK businesses than originally feared, and with that underlying resilience, opportunities can be found.
Learn more about Brexit and find popular markets here.
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