Recession in Britain will lead investors to seek options overseas
A rising number of UK and global investors will move their assets overseas as the country enters its worst ever recession.
It was announced on Wednesday that Britain’s economy suffered its largest decline on record between April and June as coronavirus lockdown curbs drove the UK officially into recession.
Indeed, the economy contracted by 20.4% compared with the first quarter of 2020.
This is the deepest recession in UK history, and the deepest ever of any G7 country.
Although the economy grew 8.7% in June, surpassing economic estimates and affirming a recovery is underway, the real test will be post summer when there will no longer be any nationwide lockdown-easing measures to buoy economic spirits, more local restrictions will be likely and aid programmes such as the furlough scheme to safeguard jobs comes to an end.
All these measures generate increasing uncertainty for Britain’s economy.
As a result, UK and global investors will become more and more nervous of this concerning situation, and will likely undertake precautionary measures to protect themselves against a possible fall in value of UK-based financial assets.
Sensibly, an increasing number of investors will be seeking to grow and safeguard their wealth by moving assets overseas through various established international financial solutions.
As the issues intensify, I believe the pace of this trend will accelerate within the coming months.
In addition, the confirmation of a recession is a good reason for investors to begin reviewing and rebalancing their portfolios in favour of global stocks, bonds, currencies and maybe property.
The weak economy also increases the likelihood of tax increases and relief cuts in the UK November Budget.
Potential targets for tax hikes may include income tax for higher earners, capital gains tax, inheritance tax, and VAT.
Moreover, new wealth taxes could be introduced, which was a consideration for the PM before the coronavirus crisis hit.
This may also lead those abroad with financial links to the UK to consider their available international options.
As such, now is a good time for investors to revise their financial planning strategies to make sure they are best-placed to grow and safeguard their wealth.