Skip to the content

Investec’s Brazier: Boris won’t last a year – even if he wins the election

28 November 2019

The manager of the Investec UK Alpha fund says the Conservatives are planning to bring in a more "moderate and sensible" leader after the withdrawal agreement is signed with the EU.

By Anthony Luzio,

Editor, Trustnet Magazine

There will be no ‘Boris bounce’ in the UK market, with senior members of the prime minister’s own party plotting to oust him within the next 12 months, even if he wins the upcoming general election.

This is according to Simon Brazier, manager of the Investec UK Alpha fund.

The FTSE has lagged behind the global market ever since the UK voted to leave the EU in June 2016, with this underperformance blamed on Brexit-related uncertainty. This has led many UK fund managers to claim that once a deal with the EU is agreed and there is greater clarity on the direction of the country, the FTSE should receive a flood of money from international investors, pushing share prices back up towards historical averages.

Performance of indices since EU referendum

Source: FE Analytics

While Brazier (pictured) agrees that any post-Brexit clarity will be positive for UK equities, he said it would be wrong to assume this will be a foregone conclusion if current prime minister Boris Johnson wins the upcoming general election and pushes through his proposed trade deal with the EU.

“I just do not buy into this Boris bounce and the rest of it,” he explained. “We will have a lot more clarity when Brexit is done. Unfortunately, a withdrawal agreement is not Brexit done, it's about 1 per cent of the process.

“If you really want a good read, read some of [senior civil servant and former permanent representative to the EU] Ivan Rogers’ speech at Glasgow University, where he talks about how Boris is boxing himself into a very poor position post-election in his ability to negotiate a decent trade deal on behalf of the UK.

“Sir Ivan is one of the most experienced EU negotiators we have ever had and he thinks it will be pretty tricky. Put that into context of the economic outlook and the like and I would remain pretty cautious.”

And Brazier pointed out that this difficult process can only begin if Johnson wins the general election – a result that is far from certain. While the Conservatives are well ahead in every poll, the manager said that none of the pollsters he has spoken to are willing to call the result this time around, with the election being viewed as a second referendum as well as a vote for government.

“For the first time ever, if you go into a Labour ‘leave’ constituency, you have to ask if people are going to vote Labour or are they going to vote ‘leave’. That is your problem,” he continued.

“If you go to a Conservative ‘remain’ constituency, et cetera, et cetera.

“And not only that, the polling in Scotland is all over the place. There's a view the Tories will lose all their seats, although I just read an article this morning saying that Sturgeon’s got it completely wrong because she's turning it into a Union debate in Scotland, hence the Tories are becoming the face of pro-Union in Scotland rather than the face of the southern-educated Etonians.”

The manager said another potential issue with the Conservatives is that they will have to win an outright majority to remain in power – they cannot count on the support of other parties in the event of a hung Parliament.

While Theresa May was able to form a minority government with the help of the DUP in 2017, Brazier described the party members he spoke to as being “utterly incandescent that Johnson sold them down the river” to get a withdrawal agreement through with the EU.

“The problem is, if Boris is three or four seats away from the majority, who does he get those seats from?

“Labour has two things in its hands. It can promise the Lib Dems a referendum and it can promise the Scottish nationalists a referendum. Boris doesn't have a lot of friends if he does not get a majority. That's all I would say.”

Brazier finished by saying that even if the Conservatives were to win an outright majority and his fears about the difficulty of sealing trade deals with the EU and the rest of the world proved to be unfounded, he would still have serious reservations about the direction of the UK given certain aspects of Johnson’s character.

However, he said he had been reassured when he brought up these concerns with a member of the House of Lords, who had previously played a senior role in the Conservative party.

“He said, ‘don't worry Simon, the Conservatives will do what we've always done’.

“I said, ‘what, defenestrate him?’ He went, ‘yes, I will not give him a year after the election, he will get the withdrawal agreement done, then the Conservatives will find someone much more moderate and sensible’.”

Data from FE Analytics shows Investec UK Alpha has made 40.05 per cent since Brazier took charge in January 2015, compared with gains of 41.77 per cent from its FTSE All Share benchmark and 39.11 per cent from the IA UK All Companies sector.

Performance of fund vs sector and index under manager tenure

Source: FE Analytics

The £2.3bn fund has ongoing charges of 0.82 per cent.

Editor's Picks

Loading...

Videos from BNY Mellon Investment Management

Loading...

Data provided by FE fundinfo. Care has been taken to ensure that the information is correct, but FE fundinfo neither warrants, represents nor guarantees the contents of information, nor does it accept any responsibility for errors, inaccuracies, omissions or any inconsistencies herein. Past performance does not predict future performance, it should not be the main or sole reason for making an investment decision. The value of investments and any income from them can fall as well as rise.