City of London financial district with Royal Exchange building.
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A majority of wealthy U.K.-based investors see an economic upside for the U.K. despite uncertainty surrounding its withdrawal from the EU, according to a new quarterly survey by UBS.
Published Tuesday by UBS Global Wealth Management, the study polled more than 3,600 global investors and entrepreneurs with at least $1 million in investable assets. Drilling down into just the U.K. high net worth investors, which accounted for 338 of those surveyed, more than 60% said they felt optimistic about the U.K. economy over the next decade. Meanwhile, 44% had a positive outlook for the next 12 months.
Forty-one percent said they believed that Brexit would have a positive effect on the U.K. economy, while 35% said it would have an adverse effect. The remaining 24% of investors believed Brexit would have a neutral impact on the economy.
One prominent individual who has also expressed bullishness on Britain is billionaire investor Warren Buffett. Speaking at the Berkshire Hathaway annual shareholders’ meeting in Omaha, Nebraska over the weekend, Buffett — the firm’s chairman and CEO — said the company would “love to put more money into the U.K.”
“If I get a call tomorrow and somebody says I’ve got an X billion-pound company that I think might make sense for you to own, and that I would actually like to have as part of Berkshire, I’ll get on the plane and be over there,” he said.
“We’re hoping for a deal in the U.K. or in Europe no matter how Brexit comes out,” Buffett added. “I’m not an Englishman, but I have a feeling it was a mistake to vote to leave … but it doesn’t destroy my appetite in the least for making a very large acquisition in the U.K.”
No ‘home bias’?
While the vote of confidence might be good news for the U.K.’s embattled politicians, the strategists at UBS also urged U.K. investors to expand their portfolios internationally. In a research note Tuesday, they warned that confidence in their home market should not be translated into “home bias.”
“Home bias makes portfolios susceptible to political and other domestic risks, whereas multi-asset mandates and other investments that are diversified globally and by asset class typically produce better risk-adjusted returns over the longer term,” said James Mulford, head of U.K. mandates and investment content at UBS Global Wealth Management.
Caroline Simmons, deputy U.K. chief investment officer at UBS Global Wealth Management, added: “We continue to advise hedging downside risks to sterling and maintaining global diversification in order to manage political risks.”
Rise of ‘zombie companies’
More cautiousness came earlier this week, when an analysis published Monday showed that financially unstable “zombie firms” are posing a significant threat to the U.K. economy.
So-called zombie firms are companies that would have collapsed in a normal economic cycle, but have been able to continue operating due to ultra-low interest rates.
The analysis, from accounting firm KPMG, said the growing prominence of zombie companies could limit the U.K.’s productivity and worsen the impact of future economic downturns.
KPMG analyzed the most recent accounts of 21,000 private companies, finding that six in 10 displayed at least one of the symptoms associated with zombie firms. It also found that 8% displayed three or more symptoms — although researchers noted that increased interest rates and more recent unpublished data could mean that number was as high as 14%.
Yael Selfin, chief economist at KPMG in the U.K., warned in a press release Monday that zombie firms’ growth “has, and will continue to, create a drag on U.K. productivity, which continues to lag our peers in the G-7 and much of Europe.”