Gatto highlights UK financials as a potential risk area for non-tariff costs under Brexit.
“A ‘hard Brexit’ scenario could put the UK financial sector at risk for example as there are still plenty of question marks around the UK’s role as the global centre for euro derivatives clearing and whether some financial institutions will relocate some of their business or manpower abroad,” he says.
Major EU states, notably France, have long envied the UK’s financial services sector.
Press reports have suggested both French and German government representatives are actively coveting UK firms to move, and looking to use Brexit to legislate the UK out of business in key areas.
“Running alongside the negotiations, the Bank of England also faces the dilemma of having to deal with higher inflation and lower economic activity and the potential risk of fiscal stimulus,” Gatto adds.
Unigestion said until it gets more clarity on Brexit it is favouring European assets and the euro over UK assets and sterling.
The only certainty seems to be that the clock is ticking, and as the end-March 2019 deadline for the UK to leave the trading bloc – deal or no deal – approaches non-tariff costs may be key for investors to watch in the months ahead.
