Video: Richard Buxton – UK Economy will bounce post-Brexit

Richard Buxton: UK Economy will bounce post-Brexit

Emma Wall, Head of Investment Analysis at Hargreaves Lansdown speaks directly to camera, and then begins an interview.

Emma: Hello I'm Emma Wall and joining me today to talk about Brexit is Merian's Richard Buxton. Hello Richard.

Richard Buxton from Merian Global Investors is being interviewed by Emma Wall.

Richard: Hi

Emma: So we have left the European Union and there's a lot of talk about what this means for both the short and long term economic outlook for the UK but you seem to be sanguine or even cheerful?

Richard: I'm extremely cheerful I couldn't disagree more with the kind of gloomy prognostications from the Bank of England that you know it's going to be incredibly sluggish and difficult. I think people haven't remembered that we haven't really had a government that could govern for the last three years, conceivably the last five, we now have a government that can actually govern, and that has an agenda, that has a plan, and that's going to spend money, that's already said by how much it's going to raise the minimum wage in each of the next five years. And I think the impact of not having had a government and the concern about Brexit, the concern about a Corbyn (government), you know, has clearly impacted business confidence and sentiment and so on. And I think releasing all that will ensure that actually growth will really positively surprise. Now the pushback I get is, well, 'trade negotiations'. I think it's crystal clear - ignore what the papers, what they say in the papers, they're just throwing rocks at each other and they're talking to their own domestic agendas. Behind closed doors neither side wants a difficult, no cliff edge exit, equally they can't do it all in 11 months so they'll probably just do a traded goods deal. And then over the coming years, it'll take that long, to gradually sector by sector, industry by industry, work out how to kind of you know de-harmonise and so on so again I think that even if there are some companies that hold back this year come 2021 and a recognition that actually the world hasn't stopped, you know, growth will accelerate. And yet there are economists out there forecasting a recession in 2021. I couldn't disagree more, I think this is going to be an extraordinarily positive environment for the UK economy.

Emma: And it used to be, certainly in developed markets, that we'd say 'well the stock market is not the economy' but one of the things that has happened over the last couple of years - so much down to sentiment that politics and economics creates – the stock market has suffered. Does this mean then if you're cheerful about economics you're also cheerful about stock market opportunities?

Richard: Absolutely, we more or less tracked Wall Street until 2016 the referendum and then clearly we have so lagged Wall Street and global investors have completely shunned the UK, as have many domestic investors, that just the beginning of people starting to come back to invest in the UK, and as they see, if I'm right, the evidence of the economic growth continuing and accelerating, then global investors will come back. Sterling is cheap so whilst of course you know a lot of UK domestic sensitive companies, I think, will have a much better backdrop, you know the international investor will be drawn to some of those big multinationals too because the currency is cheap.

Emma: And are there any particular sectors where you do see in particular that return to sentiment benefiting?

Richard: Well a stock like Whitbread, which owns Premier Inn, was really Brexit affected because you know regional travel, Monday to Thursday, it's very business sensitive. And they clearly had a very difficult 2019 but I think that that's the sort of company that you know could really benefit from a Brexit bounce in the course of the next two three years. I met with them in December and just incidentally I mean they said, you know, obviously they employ a lot of people on the minimum wage and fully accepted that 'oh yeah we're just budgeting that that pay is going to go up 5% per annum forever and it's kind of how we offset that through productivity gains'. Well, you know, if that's indicative of the sort of real wage growth that people are going to be getting again that's pretty supportive for activity.

Emma: Richard thank you very much.

Richard: Thank you.

Emma speaks directly to camera.

Emma: Thank you for watching.

This video is not personal advice or a recommendation to invest. If you are unsure about the suitability of an investment please seek advice. Investments can fall as well as rise in value and you could get back less than you invest.

Any comment on individual companies is not a recommendation to invest.

The views in this video are those of Richard Buxton and may not be shared by Hargreaves Lansdown.

Views correct as at 31 January 2020.