UK public companies are trading at a £500bn valuation discount due to the “scarring impact” of the Brexit vote.
According to research by Panmure Gordon, the valuation of companies on the FTSE all-share index has settled at a 20% discount to the rest of the world, on an adjusted basis, since the vote six years ago. It is the largest divergence since the early 1990s.
The discount rises to 37% on an unadjusted basis, when not taking account of the FTSE’s greater weighting of banks, miners and oil companies and the global market’s leaning towards tech companies, Panmure’s research showed.
Simon French, Panmure’s chief economist, said the large gap reflected a lack of confidence among investors in UK companies to deliver on their profit forecasts, with concerns about a no-deal Brexit and now a trade war with the European Union over Northern Ireland having added to the risk of failing to execute plans.
UK equities trade on a valuation of 12 times next year’s earnings, “materially below” the 16.1 times figure for the rest of the world and the UK’s 30-year average of 13.7 times.
“UK valuations have been stubbornly below these levels for the last six years since the Brexit vote,” French said.
