UK prime minister Boris Johnson is inflicting unnecessary damage on the UK’s already vulnerable economy and this could negatively impact the country’s funds industry, the chief executive of wealth manager deVere Group, Nigel Green, has warned.
Johnson, elected to the post without a public mandate, on Wednesday announced he would ask the queen to suspend parliament when MPs return to work next week, making it unlikely for a no-deal Brexit to be prevented. The queen subsequently granted his request.
“Depressingly, a recession is looming for Britain and Johnson’s highly controversial tactics seriously increase the uncertainty which will further drag on investment and trade,” said Nigel Green.
“In addition, it will further batter the beleaguered pound, which reduces people’s purchasing power. Weaker sterling means imports are more expensive, with rising prices typically being passed on to consumers.”
According to Green, it could be argued that Boris Johnson’s decision to seek a parliamentary suspension – which led to a drastic slide in the sterling – is deeply unconstitutional and has the hallmarks of a tin-pot dictator.
However, he said, it could also be argued that it is the prime minister attempting to fulfil, one way or another, the will of the British people who voted to leave the EU in the 2016 referendum.
“What we do know for sure though is that this step will inflict further unnecessary economic damage on an already extremely vulnerable UK economy,” he said.
The group chief economist at Axa Investment Managers warned that Johnson’s move to prorogue parliament undermines any apparent progress made at the G7 summit held in Biarritz over the weekend.
“Our fundamental view, has not changed”, said Gilles Moec. “It is unlikely that any positive outcome on Brexit – such as a “deal”, an extension or even a second referendum – can occur without the UK – and UK assets – first going through an exacerbation of the current crisis sentiment.
“It is not constitutionally absolutely clear that those in parliament refusing a no deal can actually, within the current time limits, impose their view on the government, just as it is also unclear whether changing the “backstop” would be enough for the Eurosceptic wing of the Tory party to support a new deal sponsored by Boris Johnson.”
“New elections may be needed before any final clarification, and given the British “first past the post” electoral system and the current dispersion of the electorate, uncertainty would be very high.”
Brexit has already cost the UK economy £66 billion (€72.7 billion) in just under three years, according to S&P Global Ratings.
In July, global investors continued to shun UK assets as the possibility of a hard Brexit increased following Johnson’s appointment.
The exodus from UK equity funds gained pace, with net outflows hitting £1.6 billion throughout the month – the highest since April – as investor sentiment for the market deteriorated further. With uncertainty reigning, this is a trend that is set to continue.
For Green, Brexit has plunged the country into an existential crisis that will last for generations.
“Boris Johnson’s decision to suspend parliament will have far-reaching economic effects, many of which will not be known for years to come,” he said.
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