21 February 2019

There’s more to life than Brexit, isn’t there?

It is not just Brexit that is dominating investor sentiment at present. Banks, cars and trade are very much in the news.


Companies that report to a calendar year end are starting their reporting season, with banks in the vanguard. We had RBS recently and HSBC, Europe’s largest bank, reported this week. Given their heavy exposure to fast growing Asian markets, the fact that they undershot analysts’ expectations was somewhat disappointing. Lloyds Bank and Barclays disclosing figures for 2018 also brought some disappointment. Lloyds continues to suffer from the legacy of inappropriate PPI selling.

 But turning to cars, the news that Honda is to close its plant in Swindon came as something of a body blow to an industry already reeling from Nissan’s decision over the X-Trail. The fact is that British car manufacturing, which enjoyed a resurgence some decades ago, is now under serious threat. It is not just Brexit that has turned its fortunes – falling demand in China, the drop in diesel sales and a lack of investment has all played its part – but the uncertainty of how we leave Europe won’t have helped, even if the official line from Honda is that Brexit was not the prime reason.

The reality is that the global automobile industry is in turmoil. Regulators are playing an ever more important part in how they operate, while new technologies are likely to mean that the cars we will be driving a generation from now will be very different to those we have access to today. In circumstances such as these, it is easy to understand why manufacturers are so protective. Regardless of our departure from Europe, it seems that building cars are likely to become a less important aspect of our economy.

As for trade, the Sino-American talks continue to dominate sentiment in the international market. The row over the role of Chinese telecoms giant Huawei cannot be helping. The response from its founder to criticisms from the US authorities over spying was notably robust. Still, markets seem to be betting on an accommodation being found, even if President Trump clearly views imposing tariffs as a preferred option. Even this close to a likely outcome to these talks, it is hard to determine what the outcome might be.

We approach spring with just as much uncertainty as we have suffered for much of the past couple of years, but with markets more settled and investors seemingly more relaxed about likely outcomes. With party resignations from both sides of the Parliamentary divide and a seemingly intractable European stance on renegotiation of the transition terms, perhaps Brexit will play a bigger role in the immediate future, though there will always be distractions. The future, as always, remains opaque.


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