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Too early for winners of trade deal, but UK not out of woods yet due to Covid

29/12/2020

Hinesh Patel

Portfolio Manager

The news of a deal is a welcome Christmas surprise after four and a half years of endless back and forth. Despite all the headlines around fisheries and old economy sectors causing tension, it appears the sectors that are going to drive the new economy, such as electric vehicles and batteries, were also front and centre in the negotiations highlighting just how important these industries now are to the UK and EU.

“The devil will of course be in the detail so it is too early to declare winners or losers just yet, but the real benefit of this news is the end to four years of ‘suspended animation’ and an opportunity to move beyond the bluster we have been hearing since the referendum campaign began.

“The good news for the UK is that this should help unblock the backlog of international investment that has been waiting for some sort of outcome before institutions begin investing in UK plc once again. Indeed, the market appears to be enjoying the news despite the usual quiet Christmas period. The overall mood though appears to be one of relief and this news should benefit the small and mid-cap businesses of the FTSE 250 who should now be able to plan with a bit more confidence and adapt to the new environment.

“However, this does not mean the UK is out of the woods. The response to Covid-19 still matters far greater as this is the key to bringing back consumer demand. Without a successful vaccine roll out we may just continue to witness scenes like we have in Dover of late as businesses struggle to cope with disrupted supply chains.