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15 Brexit-facing companies breathing a sigh of relief today


Early exit polls suggest a thumping UK general election win for Conservative party leader Boris Johnson that should provide the parliamentary majority required to force through Britain’s exit from the European Union. 

This is a positive for British business as it removes the uncertainty over whether Britain will remain part of the common market going forward or not.

It also means Britain will soon be free to unilaterally negotiate new free trade deals with major trading partners outside the European Union, rather than being stuck in an indefinite paralysis as MPs seek to obstruct a democratic vote. 

On the local share market the group formerly incorporated as regional lender Clydesdale & Yorkshire Bank (ASX: CYB), but now known as the post-merger Virgin Money UK (ASX: VUK) is up 8 per cent to $3.78. Like others it benefits both from Brexit and a more business friendly Conservative government with a majority to force through legislation. 

Link Administration Holdings Ltd (ASX: LNK) is up 3 per cent to $5.76 as the trustee and share market administration business is partly dependent on the health of UK capital markets to drive profits. The UK economy itself is heavily services focused with financial services being a key Brexit-facing earner for the country. 

Elsewhere UK facing fund managers like Pendal Group Ltd (ASX: PDL) and Janus Henderson Group (ASX: JHG) are up 6% and 5% respectively. Janus Henderson’s equities business is largely based out of London and heavily reliant on the health of European capital markets. Its fixed income business, Janus, is based out of Denver, Colorado, USA. 

While Magellan Financial Group Ltd (ASX: MFG) is up 2 per cent to $55. It has an important partnership with UK retail distribution and financial advice giant St James’s Place

Macquarie Group Ltd (ASX: MQG) is also entrenched in the UK’s financial services, asset management, and lending markets. Although it won’t be happy about Brexit, the positive for the groups are a potential end to the uncertainty, Conservative government, and step up in investment.

Elsewhere consumer-facing travel businesses Flight Centre Travel Group Ltd (ASX: FLT) will welcome an end to the uncertainty and potential for a stronger pound as many UK holidaymakers delayed overseas travel plans due to the British pound’s weakness.

The interminable Brexit delays lead holidaymakers to continuously delay travel and spending plans, with the UK’s largest travel agency, Thomas Cook, even going bankrupt in 2019. 

Thomas Cook had a significant fee-based referral partnership with Webjet Limited (ASX: WEB). The latter has taken a huge receivables and sales hit on the back of Thomas Cook’s collapse.

Travel and retail have been the two sectors hit hardest by Brexit, with UK retailers falling like flies. In December 2019 UK retail entrepreneur and billionaire Mike Ashley labelled retail conditions “unbelievably bad’ and “unprecedented”.

Even market darling and children’s stationery retailer Smiggle hit the skids in terms of UK sales and store openings over 2019. It is the store rollout golden child of retail investment conglomerate Premier Investments Limited (ASX: PMV).

Other companies to have blamed the Brexit pantomime for recent problems include Gentrack Group Ltd (ASX: GTK), Bravura Solutions Ltd (ASX: BVS), Computershare Limited (ASX: CPU) and QBE Insurance Group Ltd (ASX: QBE).

On the other hand one business flying in the UK is online accounting provider Xero Limited (ASX: XRO). Its success shows how even the wildest political dramas will have little impact on good businesses over the medium term.  

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Tom Richardson owns shares of Macquarie Group Limited, Magellan Financial Group, Webjet Ltd., and Xero.

You can find Tom on Twitter @tommyr345

The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Bravura Solutions Ltd and Link Administration Holdings Ltd. The Motley Fool Australia owns shares of and has recommended Flight Centre Travel Group Limited, Macquarie Group Limited, and Premier Investments Limited. The Motley Fool Australia owns shares of Xero. The Motley Fool Australia has recommended Bravura Solutions Ltd, Computershare, Link Administration Holdings Ltd, and Webjet Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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