While Hargreaves had said he would stay in the U.K. no matter the result, many wealthy families based in Britain had made plans to relocate to more tax-friendly regimes such as Monaco or Switzerland if Corbyn came to power. Now those plans are instantly gone, says John Elder, a founding partner of Family Office Advisors LLP, a firm based in London that provides strategic advice to wealthy families. Instead, he expects family offices will look for bargains in myriad asset classes in the U.K., from property to stakes in companies.
“There is political stability and clarity,” Elder said. “The U.K. is now an undervalued country to invest in for at least the next five years.”
The London property market in particular could see a boost, according to Liam Bailey, global head of research at Knight Frank.
“It will release a lot of pent up demand in the market,” he said. “One group that may want to move on with things quite quickly are overseas buyers. With the pound rising they’ll experience an erosion of their buying power, which may well encourage transactions,” although he cautioned that Brexit would still hover above the market.
It isn’t just foreign capital that might flow back into the British property market. Mark Stephen, the founder and managing director of Reditum Capital, a London-based real estate investment firm, said a major domestic pension fund is poised to place 50 million pounds to 100 million pounds ($134 million) to work in his fund now that Johnson and the Tories have won control of Parliament.
Reditum plans to invest the fund in land earmarked for new housing developments north of London and in Newcastle. “They premised the investment on the result going the way it did, so hopefully we can wrap that up in the next year,” Stephen said.
Boris and Brexit
Others money managers were more circumspect. Ever since the Brexit referendum was passed in June 2016, Seven Investment Management LLP, an investment firm in London with 13 billion pounds in assets, had been weaning its portfolios of U.K. stocks and looking abroad to fill the gap. Now its portfolio managers will take a serious look at ramping up British equities, said Ben Kumar, an investment strategist with the firm. But he’s telling clients he remains cautious because after Brexit no one knows whether Johnson will succeed in negotiating new free trade agreements with Brussels by December, and another with Washington.
“The problem with Boris is that he doesn’t care what he’s promised before, deadlines just go flying by, so will he get it done by December?” Kumar said. “The point is, uncertainty hasn’t gone away.”
Hargreaves is also focusing on how the next stage of Brexit negotiations proceed now that Johnson has the biggest Tory majority since 1987, when Margaret Thatcher was prime minister.
“It’s like a game of poker,” he said. “You have a hand that you’ve got to play well.”