Neil Woodford: Why Brexit will not be as negative for the UK economy as analysts are implying 

Star fund manager Neil Woodford has reiterated his long-held assertion that the longer-term impact of the UK’s decision to leave the EU will not be as bad for the economy as the sharp movements in stock prices this morning implies.

 Neil Woodford: Why Brexit will not be as negative for the UK economy as analysts are implying 


Star fund manager Neil Woodford has reiterated his long-held assertion that the longer-term impact of the UK’s decision to leave the EU will not be as bad for the economy as the sharp movements in stock prices this morning implies.

Star fund manager Neil Woodford has reiterated his long-held assertion that the longer-term impact of the UK’s decision to leave the EU will not be as bad for the economy as the sharp movements in stock prices this morning implies.

The veteran investor remarked that, ‘This clearly represents a very significant decision for the UK, for the European Union and indeed for the wider global economy. Markets are clearly shocked by the decision but, in our view, it is not as negative a development as the market’s initial reaction appears to imply.

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We have been clear in our thinking on the economic implications of Brexit for some time, that Britain’s long-term economic future would be largely unaffected by a decision to leave the European Union. We stand by these conclusions.’

He continued, ‘That is not to say there won’t be challenges in the near-term. There will. We now face a period of uncertainty as the exact terms of Britain’s exit from Europe are negotiated. Financial markets loathe uncertainty as amply demonstrated by this morning’s reaction across all asset classes.’

Woodford noted that despite all of the noise around the referendum, stock markets have actually done well since February. He said, ‘On this momentous day, it is worth reminding our clients of a few important things. On the 20 February 2016, when David Cameron announced that the EU referendum would take place, the FTSE 100 index was at 5950, the 10 year Gilt yield stood at 1.41 per cent and the sterling / dollar exchange rate was 1.44. Since then the equity market has risen 6.5 per cent but that rally has been quite narrow, being led by oils (+15 per cent), and the mining sector, up 18 per cent  Banks have performed well too, up just under 10 per cent, with pharma flat, tobacco up 7 per cent, utilities up 4 per cent and general retail up 5 per cent. .

He continued, ‘Clearly, on a day like this, markets have responded negatively to the uncertainty that follows this vote, and may continue to do so for some while. However, my job is to peer through this short-term uncertainty and focus on the long-term fundamentals of the economy and the businesses in which we invest.’

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