Maintaining your wealth in a post-Brexit economy

It revised down its growth forecasts by the largest margin on record - cutting growth estimates for 2017 from 2.3 per cent to just 0.8 per cent, although it stopped short of predicting a recession this year or next.

It also said it stood prepared to reduce rates further, to near zero, if the economy deteriorated further.

The Bank also announced an extra £70bn in Government and corporate bond purchases, the idea being that more investment in companies should benefit the broader economy.

In an unexpected move, it sought to mitigate the impact of lower interest rates on banks, which would usually suffer because they hold so much cash, by introducing a new Term Funding Scheme (TFS).

With TFS, banks will be able to secure loans directly from the Bank of England.

If every bank takes up its allocation, an extra £100bn of new cash will be pumped into the economy.

Shares reacted positively to the announcement, with the FTSE 100 rising by one per cent immediately afterwards.

It is almost unprecedented for the Bank to make a rate decision in the light of such scant information about the state and direction of the economy.

Since the Brexit vote there has been very little reliable evidence to base any forecasts on.

What we know so far is based upon surveys which gauge the sentiment of consumers and businesses.

The GfK consumer confidence index conducted a Brexit special poll in the immediate aftermath of the vote.

It found a sharp drop in confidence.

When the July poll was conducted it found that confidence had fallen even further.

The Lloyds Business Barometer post-Brexit found a sharp decline in confidence.

The July iteration of that survey, however, found while confidence was still low, it had recovered markedly from the initial aftermath.

With all of this in mind, the bank clearly wanted to be seen to be taking pre-emptive action so that, if we do have a sharp downturn or recession this year or next, it could not be accused of acting too late.

For investors, the measures seem to reinforce the wisdom of holding an internationally diversified portfolio which will spread risk and minimise the impact of a UK-focused downturn.

A weaker pound may help multinationals listed on the internationally diversified FTSE 100 that make most of their sales abroad.

Their revenues will benefit when they are converted into pounds.

The lower return on gilts may force more money into equities, pushing up values.

Borrowers on tracker mortgages may see rates fall and new buyers could be encouraged to buy or trade up the property ladder if the rate cut is passed on in full. However, rates are already so low, it is questionable whether anybody who would not borrow at mortgage rates of three per cent would suddenly decide to borrow at 2.75 per cent.

Nevertheless, the rate cut may provide existing homeowners with an opportunity to refinance and save themselves some money.

First-time buyers who are struggling to get on the ladder will also welcome the cut.

Those with savings in the bank will understandably be depressed by the announcement.

Real returns on many savings accounts (after inflation) is already negative, meaning the value of money in the bank is actually falling.

With inflation set to rise further in the coming year or more, due largely to the falling pound, it is likely that maintaining the value of your wealth will become one of the biggest challenges in our post-Brexit economy.

Neil McLoram works in business development at wealth management firm, Brewin Dolphin, in Newcastle.

The opinions expressed in this article are not necessarily the views held throughout Brewin Dolphin. No director, representative or employee of Brewin Dolphin accepts liability for any direct or consequential loss arising from the use of this document or its contents. Any tax allowances or thresholds mentioned are based on personal circumstances and current legislation which is subject to change.