U.K. Earnings Would Still Rise in a No-Deal Brexit, Citi Says

(Bloomberg) --

U.K. corporate earnings would still rise 5% next year even in the event that the nation leaves the European Union without a deal, because British companies generate so much of their sales outside the country, according to Citigroup Inc.

While domestic-focused companies would take a hit, that would be counteracted by a boost for British exporters as the pound weakens, strategists including Robert Buckland said in a note to clients. More than 70% of British companies’ revenue comes from other countries, they said.

The result would be a 2020 growth rate of 5% for earnings per share in sterling, less than the current consensus of 9%, the analysts wrote, which is “certainly not a disaster. We would be much more worried by the impact of a global recession.”

While the multinational health-care and consumer-staples companies have limited exposure to the U.K. economy, domestic banks and general retailers could see earnings decline by 20%, the bank added.

Parliament remains suspended ahead of the official Brexit date of Oct. 31 and the government on Wednesday released a paper detailing its worst-case scenario predictions in the event the country does leave the bloc without an agreement.

To contact the reporter on this story: Joe Easton in London at jeaston7@bloomberg.net

To contact the editors responsible for this story: Beth Mellor at bmellor@bloomberg.net, Phil Serafino, Paul Jarvis

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