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Brexit vote reduces value of UK companies by 16 per cent, Bristol study finds

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Written by: Hannah Baker | Posted 14 January 2019 14:07

Brexit vote reduces value of UK companies by 16 per cent, Bristol study finds

 

The impact of the Brexit vote reduced the value of UK companies by 16 per cent, according to new analysis.

Researchers at Bristol University used stock market data for 297 UK firms and bookmakers’ Brexit odds during the referendum campaign to estimate the financial impact of Brexit.

The university claims it is the first study of its kind showing the direct impact of political uncertainty related to Brexit on all major British companies.

The findings, published in the Journal of Banking and Finance, found that companies with a UK focus were most affected.

In the immediate aftermath of the referendum, prices of companies in the bottom quarter of the internationalisation ranking dropped by 21 per cent on average, while those in the top quarter dropped by eight per cent.

Read more: South West praised as 'national role model' for helping businesses grow

Of the companies analysed, those in the financial industry and in consumer-oriented sectors - such as housebuilders, retail, travel and leisure firms - were hardest hit.

Larger and fast-growing firms are more affected by Brexit, according to the study, while there is some evidence that more profitable businesses feel less of an impact on the stock price.

Experts have warned that a no-deal Brexit deal will cause further uncertainty and could ultimately lead to companies moving their business activity overseas to ensure stability.

Dr Piotr Korczak, reader in finance at the School of Economics, Finance and Management at the University of Bristol, said: “The referendum result started a period of unprecedented political uncertainly: it is difficult for companies to plan, investment is put on hold, and consumers cut spending.

"Ultimately, the economy slows down while everyone waits to see what will happen.

Read more: South West business leaders warn of 'damaging' impact of no-deal Brexit

"We would expect to see the same trends if there’s a no-deal Brexit. This prolonged uncertainty is likely to see the value of UK companies decrease even further.

"Most affected are likely to be financial firms and consumer-facing sectors operating mainly in the domestic market. Firms with international operations should be less affected.

"According to industry reports and surveys, firms prepare for adverse effects of Brexit by increasing international operations - opening foreign subsidiaries or relocating assets and staff abroad – which should act as a good 'insurance policy', as our research has shown.

“Unfortunately, this will have an adverse effect on the local labour market and individual company’s activities in the UK.”

Picture credit: Getty Images

 

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