Don’t buy into the hysteria: Brexit is not the end of the world for the UK economy, says author and financier Andrew Craig
My wife might disagree, but I think I’m generally an even-tempered individual. These days, it takes a fair bit to get me worked up or make me depressed. That said, negative emotions, like fear, depression and rampant pessimism, are horribly infectious (just ask Darth Vader), and I confess that I have had to work quite hard in the past few months to keep my chin up when faced with the unfeasible deluge of misery, angst, pessimism and woe released by the Brexit vote.
‘Folks are usually about as happy as they make their minds up to be,’ as Abraham Lincoln once said. Or, as Mark Twain would have it: ‘I am an old man and have known a great many troubles, but most of them never happened.’ When we reflect on Brexit and what happens next, how can we do our best to make our minds up to be happy and, crucially, realise that many of the ‘troubles’ being so breathlessly articulated by so many people are troubles which may well never happen?
Arguably, the main source of woe is what may happen to the economy. It is unsurprising people are concerned about this when you see headlines such as ‘£120 billion wiped off shares in day’. But where was the headline pre-Brexit that said: ‘UK stock market alone has created c. £1 trillion of value since 2009?’
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Sadly, 99% of the time, the fact that a sensible, diversified portfolio will gradually and entirely build your wealth seldom, if ever, makes front page news. It’s not surprising then that people who have never taken the time to study and understand the stock market think that it is horribly risky and something to fear.
There is ‘always a bull market somewhere’, though, in the words of Warren Buffett. It has also never been easier, cheaper or (as a UK-resident) more tax effective than it is today to benefit from this reality. Interestingly, that bull market has not been seen in much of Europe for a long time. Indeed, the economy in much of Europe has been dreadful for a number of years, while the UK economy has been really quite solid net of depreciation in sterling.
There is no question that the current economic uncertainty could negatively impact foreign investment into the UK (and this is probably one of the things we might be most worried about). But there are plenty of examples of why this fear could be being overblown. Just look at Google, which finished its new £1 billion HQ for 5,000 highly paid staff in King’s Cross regardless of Brexit, or consider Apple’s significant commitment to the new Battersea Power station development. Do we really think either of these firms are going to up sticks and move somewhere else?
In the UK, there may well be a great big recession ahead (it’s actually about time we had one in the normal run of things, or at least a stock market correction), but Britain’s home grown version of Warren Buffet, Neil Woodford, stated on the day of the Brexit vote: ‘In the longer term, it is my view that the trajectory of the UK economy, and more importantly the world economy, will not be influenced significantly by today’s outcome.’ ( https://woodfordfunds.com/words/blog/brexit-initial-thoughts )
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Unless you are Gordon Brown and think you can ban boom and bust, recessions are part of the normal functioning of an economy and, some would argue, just as a forest fire reinvigorates and renews the forest, they are actually needed to re-balance the excesses of periods of irrational exuberance. I would imagine that plenty of the young voters who feel so disenfranchised by the Leave decision might actually welcome a big house price correction if it happens, for example?
I don’t claim to know how post-Brexit Britain will develop, but I do think that the commentariat are significantly overplaying the risks (because that is what they always do – because that is what sells papers). I feel quite strongly that technological development and human progress on a large number of fronts will be far more important for your day-to-day existence in the years ahead than anything to do with Brexit. There are going to be astonishing developments in agriculture, healthcare, transport, robotics, power generation and lots else besides in the reasonably near future. It’s well worth reading the likes of The Rational Optimist by Matt Ridley and Abundance: The Future is Better Than You Think by Peter Diamandis and Steven Kotler, if you don’t believe this will be the case.
Time will tell. None of us know what will happen with any of this. There are just far too many variables and I for one think that working ourselves up into a frenzy is an inappropriate and unhelpful reaction. In terms of the bigger picture, as Franklin D. Roosevelt said at the time of the Great Depression: “We have nothing to fear but fear itself.”
Andrew Craig is the author of How to Own the World and the founder and editor of Plain English Finance. He has over 15 years of financial experience working in some of the world’s largest banks and financial institutions. He is a partner at WG Partners LLP, and is part of a specialist advisory team that supports Healthcare and Technology based companies with corporate finance, M&A and capital raising.
This article is an abridged version of a longer article written in the days after Brexit. The original can be found here: https://plainenglishfinance.co.uk/opinion/nothing-to-fear-but-fear-itself/
