Whisper it: despite all the hype, not much has changed.
Post-Brexit, if your pensions and investments in Ireland are well-managed, you should see very little change.
Now officially, Brexit happened back in January 2020. But in practice, everything rolled over until 11pm on 31 December 2020, so you’d not have expected much change before now in any case.
It’s been pointed out that the trade deal the EU and the UK have agreed is quite light when it comes to financial services. And that might cause Irish investors to wonder what it means for their savings and pensions.
There are three main questions to consider: economic impact, currency risks, and access to markets. We’ll take them in turn.
Economic impact is low to the global investor
Although Brexit looms large from the vantage point of this island of ours, to the globally-oriented investor, it is a smaller concern.
Certainly questions like the future of the US economy, the rise – and regulation – of big tech, and Chinese trade and internal disputes are much more significant.
We’ve long advocated for investors in in Ireland to take a global outlook.
And if your investment or pension portfolio has a heavy weighting to the UK and Ireland, it would be a good idea to review it. (We can help: contact us, or read more here if you have pensions in the UK you’re considering bringing back to Ireland).
If you’re a Moneycube customer, you’ll have a fairly small exposure to the UK domestic economy.
For sure, you can’t ignore it, as the sixth largest economy in the world. (In fact, UK equities look quite cheap by international and historic measures).
However the companies you’re likely investing in are global.
Take Vodafone, for example. We’re not recommending the shares, which have steadily declined in recent years. But it’s a familiar business to many Irish investors both as shareholders and customers, so a useful test case.
Founded in the UK in the 1980s, it’s a stalwart of the FTSE 100, with its HQ at 1 Kingdom Street in Paddington, London. It couldn’t sound more British.
But look a little closer.
Here’s a company that reports its results in Euros, and has operations in more than 20 countries. It has a Dutch chairman, and its largest market is Germany (where it has more than twice the level of sales compared to the UK).
Clearly, the performance of the UK economy has only a marginal effect on Vodafone’s share price.
The Brexit vote in 2016 prompted a collapse in the strength of sterling. So it’s natural to wonder if the same thing could happen again. And if it did, how would your investments be impacted?
So far, currency markets have taken the Brexit deal in their stride. It’s a thin deal, but there is no dramatic crashing out event that might have spooked markets.
What’s more, if you’ve invested with care, the currency risk is limited anyway.
Take the Vodafone example again.
Sure, the share price is listed in sterling. But in fact, the UK contributes just 10% of Vodafone’s profits. 34% of Vodafone profit comes from Germany (ie, in Euros), and 67% from Europe excluding the UK!
In fact, the investors bearing substantial currency risk are those in the UK who are measuring their returns in GBP.
Access to markets
Finally, there’s the question of whether Brexit will affect Irish investors’ access to investment markets.
In short, no.
Investors based in Ireland with a global outlook have never been limited to EU investment opportunities only. For example, the fact that there is no EU-US trade deal does not prevent you from investing in shares in Apple or Zoom.
Similarly, access to UK-based investment funds for your pension or investment portfolio using Moneycube is materially unchanged for Irish investors from 2021.
One positive outcome of Brexit dragging on for nearly half a decade (and counting) is that investment and pension providers have had time to plan. 2021 is sure to see some changes. But to the global investor, Brexit need cause too much concern.