- In a global economy starved of yield, the UK remains attractive
- After Brexit, we could see a resumption in investment within and towards the UK
- Asian and Japanese investors still view the UK as a lucrative investment option
"What's happened to the UK economy over the past two years during the Brexit negotiations?"
Nomura has calculated that since the Brexit Referendum there has been about a 3% drop in GDP, because consumer spending and business investment have decreased.
The market assigns a higher probability to a hard Brexit than we do. We are aware of it as a possibility, but deem parliament’s ability to find a majority against it to be a powerful force. As a result of this avoidance, there will be a restoration in investment within the UK, and towards the UK. In the meantime, some of the surveys have weakened but consumer confidence is not that much different from its long-run average, people have jobs wages are growing, which are all quite encouraging signs for the UK.
"One of the surprising things about the UK in recent years despite the uncertainty is that international investors, especially from Asia and Japan have continued to invest in the UK."
Asian and Japanese demands and interests remain strong, especially for UK corporate bonds; this is because the UK has a lot of influential companies that have a lot of exposure to not only UK economies but global markets.
Another reason is that when it comes to the level of interest rates in the UK whether it’s from a corporate bond, or government bond interest rates are higher than what you see in the rest of Europe. So in a world where people are starved of yield the UK remains attractive. The UK also has very deep and large financial markets opening up investors to any type of financial risk.
For more information read Growth in the shadow of Brexit
Head of Fixed Income Research, EMEA
Chief UK Economist
Senior FX Strategist