Brexit Market Commentary - December 2020

David Watson

David Watson

Chartered Financial Planner

As the end of the year approaches, the deadline for the Brexit agreement is impending.  With global markets beginning their recovery back to the levels they saw at the start of 2020, the FTSE’s recovery continues to be stumped by Brexit talks. Some main issues continue to cause a deadlock, and investors are wary about the future for the British economy. 

The impact of Brexit is likely to be felt in our daily lives as new border checks will impact the movement of food supplies and trips to Europe will involve more planning. In addition, many regulations will change surrounding elements such as state pensions. If you are a UK citizen already living in an EU country then this will not have such an impact, unless you move to a new country. However, for any UK citizens moving abroad after 31 December 2020, it remains unclear as to whether the pensions will be increased as they would be if you were still in the UK and whether benefits would be limited to a certain time.

With an agreement yet to be reached, much is still uncertain. For years, the EU and UK have been trading for free, without any tariffs being applied. However, without any agreement, it is unclear what the rules will be going forward. It has been predicted by the Office for Budget Responsibility, that leaving the EU without a trade deal could lead to a decrease of 2% in national income by next year. 

The uncertainty surrounding the UK exiting the EU has caused great concern about the values of savings and pensions invested in the UK stock market. Maintaining a diversified global portfolio continues to be essential as it can reduce the volatility caused by the Brexit uncertainties. The FTSE has been very volatile and has been reacting to news as it has been coming in, both positive and negative. However, it remains unclear what will happen to UK stocks in the long run once the Transition Period has ended. Despite this, the current short-term uncertainty is very unsettling for investors as Brexit talks continue, to try and reach an agreement.

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If you would like to discuss this further, please do not hesitate to get in touch with myself, a member of our Wealth team or your usual Johnston Carmichael adviser.