Boris Johnson’s resignation will trigger a leadership contest for the Conservative Party and premiership that is unlikely to be settled before the autumn, leaving a lengthy period of uncertainty over the direction of the country and economy.
Azad Zangana, Schroders’ Senior European Economist, said:
Johnson’s government often leaned towards populist policies, and while he will always be remembered for Brexit, recent fiscal policy also followed a similar approach. This may have boosted growth in the near-term but also contributed to higher inflation, and higher public borrowing. The recent decisions to increase corporation taxes instead of personal or sales taxes is just one example.
The resignation of Chancellor Rishi Sunak a couple of days ago highlighted the disagreement between the Treasury and Prime Minister’s Office. The suggestion was that voters were not being given the full picture when it came to the state of the economy and public finances.
Looking ahead, the outlook hinges on who Johnson’s replacement might be. A return to traditional Conservative politics will probably bring about some austerity over the next few years, but also a return to business friendly policies. However, another populist politician could lead to more of the same approach for the economy.
In terms of the reaction in markets, news of the resignation helped lift sterling against most other currencies, though the moves have been relatively small.
Caspar Rock, Cazenove Capital’s Chief Investment Officer, added:
Sterling is at its lowest level since the Brexit referendum in 2016 and could remain under pressure while there is so much uncertainty. Over the medium term, the currency might start to recover if the next prime minister is more fiscally conservative than Johnson and adopts a more flexible approach to the interpretation of Brexit.
The weakness in GBP has helped the performance of our portfolios in a difficult period for markets. We will continue to carefully monitor and manage currency exposure.
For further information, please contact:
Estelle Bibby, Head of Media Relations +44 20 7658 3431 estelle.bibby@schroders.com
Note to Editors
About Wealth Management
As a long-established wealth manager with an absolute focus on preserving and growing our clients’ wealth, what matters most to our clients, matters most to us.
Private individuals, family offices, trusts, institutions and charities all rely on us to provide them with bespoke wealth management services. Skilled in investment management, wealth planning and banking services – we also offer discretionary fund management to external advisers and their clients, and we are the largest charity fund manager by assets under management in the UK.
For two centuries we have helped clients look forward to a successful future. With each client, we plan for the long term and invest the time to gain a detailed understanding of their unique circumstances, goals and ambitions. The majority of our clients, and many of our own people, work with us for years, decades and even generations. This creates relationships of unusual depth.
Our experience of navigating complex markets and adapting to change helps us balance risk and reward. The investment expertise we call upon as part of Schroders, a truly global asset manager, combined with our long-standing experience of advising clients, is what sets us apart.
Wealth Management office locations
Cazenove Capital: UK and Channel Islands. Schroders Wealth Management: Singapore, Hong Kong and Switzerland.
Schroders Wealth Management, including Cazenove Capital, has £81.2 billion in assets under management globally across all Wealth Management offices (including Benchmark Capital, part of wealth management) as at 31 December 2021.
Further information about Cazenove Capital can be found at www.cazenovecapital.com.
Issued by Cazenove Capital which is part of the Schroders Group and is a trading name of Schroder & Co. Limited. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority.
When investing, your capital is at risk.
The value of your investments and the income received from them can fall as well as rise. You may not get back the amount you invested. Cazenove Capital is a trading name of Schroder & Co. Limited. Registered Office at 1 London Wall Place, London EC2Y 5AU. Registered 2280926 England. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. For your security, communications may be taped or monitored.