Five years on from the U.K.'s referendum vote to leave the European Union, money managers are still searching for data to quantify its hits to the U.K. economy.
That's not because there is no data — markets have continued to operate, trade is still happening and statistics are still published by official entities — but rather because such data has been distorted by a much bigger concern: COVID-19. While the U.K.'s decision to leave the EU was revealed on June 24, 2016, it wasn't until January 31, 2020, that the U.K. officially left the bloc and began a set of negotiations with the EU over future relationships in financial services and other sectors.
And then COVID-19 hit markets in March.
"It's harder to assess the Brexit impact (five years on) because of COVID," John Roe, London-based head of multiasset funds at Legal & General Investment Management, said in emailed comment. "The virus, and associated fiscal stimulus, has caused so much volatility that underlying trends are harder to pick out." LGIM runs £1.3 trillion ($1.8 trillion) in assets under management.
Mr. Roe thinks underlying trends will be difficult to differentiate throughout this year because the U.K.'s COVID-19 vaccination program is several months ahead of other European countries and no fiscal tightening is expected until 2022 at the earliest.
Meanwhile, the U.K. and EU are still thrashing out final details on some areas of financial services, while money managers continue to develop their operations in the U.K. and on the continent as they work around the loss of passporting rights.
Other executives agreed that COVID-19 has muddied the impact of Brexit.
"Brexit is important longer-term in terms of how the U.K. functions, but it's still less important than COVID(-related) reopening," said April LaRusse, London-based head of fixed income at the £707.7 billion Insight Investment. "Fortunately — or not fortunately — we haven't been focused on Brexit more or less since the vote happened, and we (then) calmed down." When the U.K. left in early 2020, it was a bit of a "non-event, mainly because we had something bigger to worry about" that quarter — COVID-19. "I'm sure when we are less focused on COVID there will be more focus on Brexit," Ms. LaRusse said.
Insight executives are looking at data from sources including the U.K.'s Office for National Statistics' report on the effects of the exit and the coronavirus on U.K. trade in goods, published in May. "I was trying to look for some useful data (in the publication) — anything we can see that suggests the U.K. is hurting because of Brexit. The data is going to be messy because of COVID. But you can definitely see in the data … a pretty material decline" in total trade in goods with EU countries, down 23.1% between the first quarter of 2018 and the first quarter of 2021. Stockpiling of inventories in the fourth quarter of 2019 — immediately ahead of the official exit — also would have "muddied the numbers somewhat," Ms. LaRusse said.