Boris Johnson’s Brexit stance may lead to mass departure of wealth
The UK Prime Minister’s contentious plans to rewrite parts of the Brexit withdrawal agreement could result in a substantial exodus of wealth from Britain.
As the European Union demands the UK abandons plans to modify the Brexit deal by the end of September or be at risk of trade talks dissolving, an intense war of words has ensued.
As it stands, the EU now says no trade talks will happen, therefore with no chance of a deal, unless the UK stops its recently proposed Internal Market Bill.
Such a highly polemic stance by the PM has far-reaching consequences and would lead to a significant exodus of wealth from the UK for two main reasons.
First, credibility and trust in investing in the UK will be compromised should an international treaty be broken. Investment is attracted to certainty, stability and reliability.
Going back on a key trade deal at the eleventh hour will not appeal to highly sought after foreign direct investment into the UK. Investors will focus their attentions elsewhere rather than bring new money into Britain.
Second, the level of uncertainty will make UK and international investors already invested in UK-based financial assets more and more nervous.
As a result, they would likely take precautionary steps to protect themselves against a possible drop in the value of these assets.
An increasing number of investors will therefore be more inclined to seek to grow and secure their wealth by moving assets overseas via several established international financial solutions.
Right now, it would appear Boris Johnson is on a collision course with the EU by breaking international law.
This weakens confidence and credibility in Britain to current and future domestic and overseas investors who are seeking a safe jurisdiction to invest.