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What a momentous week for the UK. With the official triggering of Article 50 now out of the way, Brexit is set to grip the financial world for the next two, and potentially more, years with a constant stream of changing information as Britain departs from the EU. But what should you be watching as the UK takes a step into the unknown?
A sector attracting a lot of attention in the run up to negotiations is the Airline sector. Currently, cheap inter-European flight operators such as easyJet (EZJ) enjoy the freedom to fly throughout the continent as they choose. With Brexit, however, this could be set to change.
easyJet currently operates within the EU’s Common Aviation area, allowing it freedom of movement. However, if the UK were to leave the agreement, as has been alluded to by members of the UK government, then British airlines would have to drastically change their operations. This could include relocating crucial infrastructure to the continent, while the prospect of losing access to inter-European flights could mark a drastic change for the airline’s prospects. Might the sector hit some turbulence as routes are redrawn? Or will they be clear for take off should the UK negotiate a new aviation deal with its continental peers?
Another hugely popular sector that could be set for a dramatic change is the Housebuilders. It comes as no surprise that a great amount of the workforce that construct British homes come from the EU, however with the UK government wanting to keep tighter controls on immigration to Britain, the attractive supply of cheap labour for UK Housebuilders could be cut off. Should this happen, could we see a rise in house prices as companies such as Barratt Developments (BDEV), Persimmon (PSN) and Taylor Wimpey (TW.) have to take on more expensive workers as a result of the limited labour supply, consequently resulting in rising inflation? Could the potential for rising prices hamper demand for homes in the UK? Or might Housebuilders instead enjoy greater revenues as Britons welcome life outside of the EU?
Finally, we come to the key Banking sector. Comprising over 13% of the UK’s blue-chip UK 100 , the fortunes of these five financial giants are intrinsically linked to the movements of the index, while the financial sector as a whole makes up a significant portion of the UK’s GDP as a whole. The prospect of losing access to key markets and investors in Europe could harm names such as Barclays (BARC), HSBC (HSBA), Lloyds (LLOY), Royal Bank of Scotland (RBS) and Standard Chartered (STAN) in the UK. However, ministers have made it clear that they are hoping to keep access to the EU in what may be a tailor-made deal for British financiers. Will the European Union spoil the government’s plans and oppose a financial services access agreement? Or could a negotiated and attractive new deal provide bankers with something to cheer?
With the prospect of talks lasting for up to 2 years, while the negotiation of finer details could potentially play out even longer, you are going to need an accurate, reliable and timely source of information. That’s where we come in. Traders such as myself keep our clients informed of potentially market moving events before, during and after they happen, while our award-winning research department sends out multiple daily publications that keep our clients in the know, with the tools behind them to make the right investment decisions at the right time.
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Ben Vartia, Trader, 31 March
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