Double down on deserters

Whether you believe they were leaving anyway or that Brexit has forced some large companies to quit the UK for other shores, could these soon-to-be former residents offer investment opportunities?

In the last few weeks, some of the world’s largest companies have announced they are to pull significant parts of their manufacturing and management out of the UK as it stumbles towards a no-deal Brexit.

In February, Honda announced it would close its massive plant in Swindon in 2021, causing the loss of 3,500 jobs (not to mention those down the supply chain). Immediately, its share price rose. The company, which is one of the largest listed on the Tokyo Stock Exchange, saw more than a 2% uplift.

Although the company said its decision was not based on Brexit, commentators were quick to point out that a Free Trade Agreement (FTA) with the European Union – which the UK will soon leave – was likely to have been a contributing factor. Having a factory in the UK, outside this FTA area, would be surplus to requirements.

Before Honda, aircraft builder Airbus had a somewhat public spat with UK politicians about what it called their rather cavalier approach to a no-deal Brexit. At the end of January, the France-headquartered company threatened to pull some of its significant production facilities out of the UK and its share price has been on the up ever since.

Past performance is not indicative of future results. Your capital is at risk.

Music and media producers Sony announced at the end of August 2018 that it would move its European HQ from London to Amsterdam. Guess what? Its stock rose 10%. The company, which is also listed on the Japanese exchange, said it was concerned about the free flow of goods and people across the continent, which Brexit put at risk.

This point is key to all these share price increases – the company took away the risk that Brexit might trip them up and investors rewarded them for it.

Although taking risk is key to making any investments and running a successful company, this risk has to be managed. If shareholders think company bosses are not adequately considering the risks a company faces, they will sell out of their holdings. If they think executives are keenly aware to the risks lining up, they will buy more shares and prices will go up.

Whatever your views on Brexit – for or against – the uncertainty around the UK’s relationship with its closest trading partners is one of the biggest issues on the current corporate agenda.

Have a look at other companies it could hit before (or even after) March 29 and manage your own risk.

Your capital is at risk.

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