It’s been a poor year for the pound, savers and UK-focused retailers but firms with sizeable foreign earnings have prospered
Britain’s consumers and UK-focused firms are among the biggest losers one year on from the shock Brexit vote that drove the value of the pound to its lowest level in more than 30 years.
On the first anniversary of the EU referendum, financial services company Hargreaves Lansdown said clear winners and losers have emerged, with the pound taking the biggest hit on the markets. Blue chip companies with a large proportion of foreign earnings are among the biggest winners.
The pound tanked when the result of the referendum became clear on 24 June and 12 months on the currency is still down 15% against the dollar at just above $1.26. It is also down 14% against the euro, at about €1.13.
A weaker pound has reduced the spending power of UK holidaymakers abroad, and put pressure on consumer finances by pushing up inflation to a four-year high of 2.9%.
“The main financial effect of Brexit has been felt in the pound,” said Laith Khalaf, senior analyst at Hargreaves Lansdown. “Holidaymakers have probably been the most obvious losers from Brexit so far, though inflation is also gradually ratcheting up the pressure on consumers more broadly.”
The fall in the pound and tougher backdrop for household finances has also hurt the fortunes of some UK focused companies. Hargreaves Lansdown said that while the FTSE 100 was up 18% over the past year, UK focused retailers Dixons Carphone and Next had suffered big falls, with shares down 29% and 27% respectively.
Cash savers were also cited in the report as losers from the Brexit vote, because of a combination of low interest rates and higher inflation.
“The resurgence of inflation makes the low interest rate environment even more punitive for cash savers because their money is losing its buying power even faster,” Khalaf said.
The Brexit vote appeared to scupper the idea that the Bank of England would soon increase borrowing costs, with market expectations of a rate rise by 2018 plunging from 86% on the day of the referendum to 20% now.
As Brexit negotiations finally got under way this week, the TUC said that 12 months after the referendum the government had failed to come up with a plan to make Brexit a success for working people.
“We have spent the last year fighting for the best Brexit deal for working people – one that protects their jobs and their rights at work,” said Frances O’Grady, its general secretary.
“A no-deal Brexit would be devastating for jobs and the UK economy – and after the election result, the prime minister has no mandate for it.
“A good Brexit deal for working people means tariff-free and barrier-free trade with Europe. And it means a level playing field for workers’ rights written into the Brexit deal. That deal must protect all current rights and make sure hardworking Brits do not miss out on new protections enjoyed by EU workers in future.”
Large multinationals listed on the FTSE 100 but with significant foreign earnings have been among the biggest winners from the vote, benefiting from a weaker pound.
“All of the top 10 performing stocks have significant international earnings which have helped propel their stock price performance thanks to weaker sterling,” Khalaf said. “There are other factors at play too however; for instance commodity producers Glencore and Antofagasta have benefited from price rises in the stuff they dig out of the ground.”
The biggest 10 companies listed on the FTSE 100 have become more dominant since the Brexit vote: they now account for 46% of the leading index.
Stock markets elsewhere in the world have performed well over the past year. For example, the value of every £100 invested a year ago in Germany’s DAX is £144, compared with £123 for the FTSE 100.
FTSE 100: biggest risers
- Glencore: +80.8%
- Antofagasta: +71.6%
- Coca-Cola: 69.4%
- 3i Group: 60.4%
- Intercontinental Hotels Group: +55%
FTSE 100: biggest fallers
- Capita: -38.4%
- BT Group: -34.9%
- Dixons Carphone*: -29.5%
- Hikma Pharmaceuticals: -27.8%
- Next: -27.3%
*Dixons Carphone dropped out of the FTSE 100 in March