If you are over 40, like me, you are probably vaguely familiar with the great British television comedy, The Benny Hill Show. Led by its titular star, Benny Hill, it was a uniquely British comedic variety show that dabbled in burlesque, slapstick and double entendre. It was a huge hit in the U.K. in the sixties and seventies and survived until the late 1980s with its unique blend of absurdity.
Nearly every episode ended with a “chase scene” where the performers in costume and any guest stars would perform a Keystone Kop-esque chase of Benny around the set. It made no sense, was weirdly chaotic (people would run off one side of the screen and return on the other) and was all set to the tune, Yakety Sax. [Narrator: You know that song even if you don’t know it by name]
That chaotic end credits scene sprang to life when I read the latest news about the U.K.- European Union’s tentative Brexit agreement. I defer to our friends at the BBC for the full breakdown here. With a draft agreement in hand, Prime Minister Teresa May went to secure backing from her ministers. What ended up happening was a near revolt. Several Cabinet Minister including the minister in charge of Brexit negotiations have resigned. PM May is Benny Hill and her cabinet are all chasing after her like it is The Benny Hill Show. It is chaos mixed with a dash of absurdity and it is just another headline driving the investment narrative to the negative right now.
What does it all mean economically and politically? Well in the short term the Pound Sterling and UK debt is going to take a solid punch to the face. If you have ever wanted to see Stonehenge or travel Edinburgh’s castles those trips just got a bit cheaper. In the long term? That is more uncertain. It is possible that a vote of No Confidence in PM May will happen. If she is ousted, what happens to the deal she has presented this week? Does it get torn up and new negotiations begin? That is a real unknown. Do the British electorate do a second vote on Brexit? That would be a real lurch into darkness without a flashlight. I forecast a bull market in British political reporting if that happens.
What does it mean for you as an investor? Probably not a whole lot unless you are heavily over-weighted in the United Kingdom. Most Canadians might have 2% exposure to the U.K. equity markets. They won’t disappear. Their economy will survive. Their companies are still well run and growing. Great Britain is not the power it once was but they survived World War II, the Global Financial Crisis and the break-up of The Beatles; they will survive this too. It just might take some time and a bit of pain for your U.K. investments.