It’s no surprise investors are getting cold feet over buying (or even holding) UK assets right now. The threat of a no-deal Brexit and the possibility of a subsequent economic meltdown is worrying enough for the investment community.
But with Parliament prorogued, the main political parties splitting, and British courts even suggesting the prime minister has been lying to the queen, Britain’s reputation as a safe and sensible place to invest in is being shot to pieces.
And this is prompting a mass exodus of investors from UK assets, as recent data from deVere Group shows.
Hitting the exits
The financial consultancy firm, which has more than $12bn under management, advises it has seen a 35% spike in the number of homegrown and international investors who are cutting their exposure to UK assets since Boris Johnson became PM in July.
As if this wasn’t bad enough, deVere CEO Nigel Green suggested things could get even worse: “There is no end in sight to the unprecedented political chaos in the UK… indeed, it looks set to continue to spiral downward and the uncertainty to intensify.”
He added that “unless the toxicity surrounding Brexit stops… investor confidence will continue to decline and even more British domestic and international investors with exposure to UK assets will continue to move assets away from the UK.”
Banks in bother
This bearishness is already having a devastating impact on scores of British stocks, both large and small. Take Britain’s biggest high street banks Lloyds, Barclays and RBS, for instance.
These FTSE 100 shares began to sink again around mid-April, the point at which British and EU lawmakers agreed to prolong the Brexit uncertainty by extending the withdrawal deadline to October 31. Since the referendum of June 2016 these three banks have lost between 20-30% of their value, and it’s quite probable investors will keep sprinting towards the exits as the tough political and economic environment pushes revenues down and bad loans up.
Better dividend buys
Not even the attraction of huge forward dividend yields at the banks (which all sit north of 6% for the trio mentioned) is enough to tempt buyers in right now. No shock here, then. Why take a chance with such high-risk, UK-focussed stocks like these when there’s plenty of other Footsie income shares benefitting from the current turmoil in Britain?
deVere’s Green notes “a growing number of those who are serious about building and safeguarding their wealth are exploring legitimate overseas options.” And this is evident from the climbing share prices of dividend growth favourites such as Ashtead and Smurfit Kappa in recent months, not to mention of big-yielders including Vodafone (forward yield: 5.1%) and GlaxoSmithKline (4.8% forward yield).
There’s a variety of other tactics investors can employ to protect themselves from — or actually get rich from — the current Brexit malaise. That includes buying stocks that report in foreign currencies and so benefit from a decline in the pound, or purchasing classic safe-havens like precious metals producers (Fresnillo) or defence plays (BAE Systems).
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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended GlaxoSmithKline. The Motley Fool UK has recommended Barclays, Fresnillo, and Lloyds Banking Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.