LONDON (Reuters) – Britain’s FTSE 100 will take until the end of next year to return close to record levels, according to a Reuters poll, held back in the near-term as investors grapple with the possibility that Britain leaves the European Union with no deal.

The median forecast of 30 analysts, brokers and fund managers polled by Reuters Aug. 17-30 projects the FTSE 100 reaching 7,900 by the end of 2019, just shy of its record high of 7,903.50 hit in May 2018.

In a poll taken three months ago, the panel expected the FTSE 100 to hit 7,900 six months earlier, by the middle of next year.

The latest Reuters survey results suggest the FTSE will end this year up just 1 percent and then gain 1.7 percent in 2019, well below the expected overall rate of inflation. Those gains in percentage terms are also just half of those forecast for the pan-European STOXX 600. [EPOLL/FRDE]

Worries that Britain could fail to reach a deal with Brussels before it leaves the European Union in March 2019 have been a particular pain point for UK equities and sterling this year.

“In the UK the key is clarity on the final outcome of the Brexit negotiations with the EU,” Ian Forrest, investment research analyst at The Share Centre, said.

“If there is no clarity by March next year the market will become increasingly volatile if the prospect of No Deal gets closer,” he added.

In the meantime, that lack of clarity has forced businesses to delay investment decisions while investors have shied away from UK equities.

So far this year UK equities have lost 1.6 percent. That followed two years of gains, fuelled by a weak currency since the June 23, 2016 referendum vote to leave the EU. The FTSE 100’s large, dollar-earning constituents have benefited from a revenue boost from a weaker pound.

But allocations to UK equities by fund managers this month had their biggest one-month drop since May 2016, also due to rising worries over a ‘no-deal Brexit’ scenario, according to Bank of America Merrill Lynch’s August fund manager survey.

More than a quarter of fund managers are underweight UK equities.

Coupled with the fact the UK market remains cheap compared with euro zone stocks on a forward price-to-earnings basis, some investors see this as an opportunity.

“Brexit poses a lot of challenges to UK companies, but it’s certainly not the nail in the coffin,” said Adam Laird, head of ETF strategy for Northern Europe at Lyxor ETF.

“Remember the UK market has a lot of international exposure, a lot of mining and energy. Investors would be foolish to write it off completely,” Laird added.

(FTSE 100: cheaper than Euro zone stocks,

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