Asset prices and the pound will fall on a Boris Johnson general election victory

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12 Jun, 2019

Asset prices and the pound will fall on a Boris Johnson general election victory

A Boris Johnson victory in a general election would cause UK asset prices and the pound to fall, warns the CEO of one of the world’s largest independent financial advisory organisations.

The warning from Nigel Green, founder and chief executive of deVere Group comes following publication of a ComRes poll in The Daily Telegraph that suggests that with Mr Johnson as leader the Conservatives could be heading for a landslide at the next election with a majority of 140.

Boris Johnson, the current frontrunner in the Conservative leadership contest, officially launches his campaign today.

Mr Green notes: “UK asset prices and sterling will certainly fall on a Boris Johnson victory at a general election as he has made it quite clear that he would be willing to pull the UK out of the European Union with no deal in place.

“Should Mr Johnson go on to win a general election, especially with a clear majority, he will be emboldened in his approach to Brexit.”

He continues: “Mr Johnson’s no-deal relies on the idea that the absence of a deal on 31st Oct will -by default- mean a no deal Brexit. And that parliament and Brussels are both powerless to stop it. 

“This suggests that the parliament vote against a no-deal a few months ago is limited to banning the government from making it a policy goal, but it can’t stop a no-deal through inaction.

“A likely fall in UK asset prices and the pound would not just be about his Brexit policy. He is also viewed by many as untrustworthy and lacking in consistency.”

Last week, the deVere boss noted: “During the past two years, the pound has been battered when it comes to its price against other currencies.

“The significant drop in the value of the pound has contributed to reducing people’s purchasing power and a drop in UK living standards. Weaker sterling means imports are more expensive, with rising prices being passed on to consumers.  

“The fall in the pound is good for exports some claim, but it must be remembered that around 50 per cent of UK exports rely on imported components. These will become more expensive as the pound falls in value.

“A low pound is, of course, bad news for British holidaymakers and travellers abroad - with trips to Europe and the U.S. increasingly expensive.  Even destinations such as Dubai and China are more expensive as their currencies are pegged to the U.S. dollar.

“Arguably, the key issue for the UK, however, is that one of its biggest and most important sectors, financial services, will suffer from another knock to the pound. It will be hit because it is built on foreign investment that puts its faith in a strong pound.”

Financial services contribute 6.5% towards British GDP and are part of an overall services sector that forms 80% of the country’s economic output.

Mr Green concludes: “A Boris Johnson win at a general election- especially with a clear majority – can be expected to prompt a significant number of UK and international investors in UK assets to consider the overseas options available to them to build and safeguard their wealth.”