How will Brexit affect private clients?

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The news agenda continues to be dominated by the political and economic fallout of the UK’s “Brexit” vote. It seems that for some time uncertainty has been the only certainty, with commentators unable to agree on the likely impact of the decision. So what do we think will be the effect on our clients?

The news agenda continues to be dominated by the political and economic fallout of the UK’s Brexit vote. It seems that for some time uncertainty has been the only certainty, with commentators unable to agree on the likely impact of the decision. Stock markets around the world have been remarkably resilient, with the FTSE100 continuing to perform strongly on the back of overseas earning; sterling has dropped sharply against other currencies; politicians have resigned and we have a new-look government to implement the Brexit vote. So what do we think will be the effect on our clients?

Economic uncertainty will without doubt hit clients in their pockets, but market volatility is a fact of life and is unlikely to be a long term issue for most private clients. The untangling of the legal ties between the UK and Europe will have a far greater impact in the years to come.

Take, for example, our clients who are in one way or another exposed to the rural economy, which for years has benefitted from EU subsidies. The departure of the UK from Europe will mean an end to those subsidies, and already representatives of farmers and landowners are lobbying hard for some comfort that a replacement domestic system will protect those affected.

Such clients also rely heavily on employing seasonal labourers, as do many of our mid-market business clients. Changes to the flow of labour, whatever form that takes, could have a potentially devastating impact on the operations of those employers.

Even greater might be the impact felt by businesses who export to Europe, with concern already being expressed about the volume of orders being placed by customers in Europe and longer term worries about what trade agreements the new UK government might be able to negotiate on their behalf. Their fears might in the short term be allayed because of the fall in sterling, which has hit importers harder, but the longer term effects are more difficult to predict.

All clients will be watching to see if the effect of a Brexit vote is that the Chancellor feels the need to raise taxes. Prior to the referendum the then-Chancellor George Osborne claimed that a vote to leave the EU would cost so much that income tax might have to rise by as much as 8p. We think (and, it seems, so does Mr Osborne’s successor Philip Hammond) that such a knee-jerk rise would be unnecessary. But it would be no surprise to see the recent cut in the capital gains tax rate overturned, and perhaps a change to the way inheritance tax exemptions work to raise more from that tax.

Despite all this, there will be winners to emerge. Already, a weaker pound is likely to attract more visitors to the UK this year which should help those involved in the tourism sector. And the cuts in interest rates from what was already an historic low, has been music to the ears of those clients who are borrowers rather than savers.

Inward investment into the UK also looks cheaper. Many overseas clients invest into the prime residential property market in the UK, which has for a long time looked expensive, but perhaps will now be more competitive with the major international centres around the world.

Those same overseas clients might however be waiting to see what impact Brexit has on immigration rules and the proposed changes to the taxation of non-doms, which are currently still in the planning stage. It would be no surprise to see such changes taking even longer to become law as the Treasury grapples with more immediately pressing matters.

Whatever your view on the outcome of the referendum, I think we can all agree that the UK will never be quite the same again.
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