IG’s Analysis Of Post-Brexit Economies Reveal Short-Term Opportunities For Hedge Funds

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Brexit could reduce the UK’s exports to the EU by -7.73% by 2025

Smaller countries made major gains as UK’s post-Brexit policies took place, but trade benefits may be short-lived due to infrastructure and financial stability risks

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The Impact Of Brexit On International Trade

[LONDON, UNITED KINGDOM, November 1, 2021]IG Prime, the institutional prime brokerage unit of IG Group (LON:IGG), today published a new report, An analysis of post-Brexit economies, which evaluated export data to determine the impact of Brexit on international trade and to show areas of potential growth both in terms of the market and in terms of the products within each market. IG Prime gathered export data from the United Kingdom, countries from the EU, and some additional selected countries, to identify trends stemming from the impact of various factors that occurred during 2020.

The report evaluates the UK’s main exports prior to Brexit, such as precious metals, vehicles, and pharmaceutical products, alongside the top exporters of the same products in the EU and Singapore to understand which countries were able to increase exports.

“Smaller economies offer unique opportunities but are also higher areas of risk, said Max Hayden, Global Head of Prime Brokerage Sales at IG Prime. “Short positions may see more benefit as the larger initial gains steady out, but hedge funds and family offices looking for more steady growth would likely be better served focusing on countries with existing economic infrastructure to support the transition from UK to European trade.”

According to IG Prime’s research, the top three countries benefitted from Brexit were Finland, Luxembourg, and Portugal. Other countries that benefited from the vacuum left by the UK after Brexit included Ireland, Croatia, Greece, Lithuania, and Cyprus. The highest proportional increases occur in locations where trade was smaller to begin with.

  • In Finland, exports of aircraft, spacecraft and parts thereof beat estimates by 11,715.28%, at €102.71m instead of its predicted €0.87m
  • Luxembourg’s actual figures for exports show an increase of 2017.99% above estimates, at €16.38m instead of €0.77m

A Huge Leap Into The Unknown

Chris Beauchamp, Chief Market Analyst at IG Group, commented: “The UK’s vote to leave the EU in 2016 represented a huge leap into the unknown and COVID also created an additional layer of complexity to international trade and cross border investments.

Some hedge funds who aren’t swayed by volatility may focus on shifting investments in Europe from the UK to a short-term spread across smaller economies like Croatia and Ireland. Once the effects of the pandemic subside and a clearer picture of Brexit emerges, many are likely to move back into the UK. Regardless, the combination of Brexit and COVID has unveiled opportunities for hedge funds to think about invest more broadly than before.”

IG Prime, the institutional prime brokerage unit of IG Group, uses the IG’s platform capability, range of markets and depth of liquidity to support institutional clients such as hedge funds, family offices and brokers. Through its web-based trading, mobile apps, and proprietary execution systems, IG Prime gives clients access to a range of synthetic, custody, trading, and financing solutions.

About IG 

IG Group has been at the forefront of trading innovation since 1974. Since then, we’ve evolved into a global fintech company incorporating the IG, tastytrade, IG Prime, Spectrum, Nadex and DailyFX brands, with a presence in Europe, North America, Africa, Asia-Pacific and the Middle East.

Our award-winning products and platforms empower ambitious people the world over to unlock opportunities around the clock, giving them access to over 19,000 financial markets. Today, more than 400,000 clients call IG Group home.

IG Group Holdings plc is an established member of the FTSE 250 and holds a long-term investment grade credit rating of BBB- with a stable outlook from Fitch Ratings.

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