MYTH 3 - Financial Services - Swiss financial services have thrived outside the EU - This could be the model for the UK.
Some Euro sceptics look towards the Swiss financial services industry, which has thrived outside the EU, and believe this model could work for the UK. However, Switzerland's relationship with the EU is complex and could not be replicated easily.
The single currency regained ground on sterling this week thanks to some rare pro-Brexit sentiment in the UK, but felt the weight of interest rate announcements in the US.
Last Friday the Federal Reserve chairperson, Janet Yellen, made a long-awaited pubic appearance. Investors were eager to hear whether she would endorse the comments made by her colleagues over the previous couple of weeks, pointing to higher interest rates in June or July. She sort of did, confirming that "probably in the coming months such a move would be appropriate". It was not warning that investors should gird their loins for a rate hike this month but Ms Yellen certainly did not rule out the possibility and her remarks were broadly positive for the dollar.
MYTH 2 - Trade & Industry - The UK's trade balance will collapse if we withdraw from the EU.
The UK runs a deficit in goods and a surplus in services with the EU. We believe the idea that the UK's trade balance would collapse if the country leaves the EU is an exaggeration. The UK may even be able to retain access to the single market, which takes almost half its exports. Yet it might have to accept most EU rules and even pay money to Brussels in return, like Norway and Switzerland.
It was more of the same for the Euro. Despite some reasonably brisk €Z economic data it failed to shine, principally because investors' attention was elsewhere.
That is not to say it had an awful week: the euro lost four fifths of a cent to sterling and was down by only a dozen ticks against the US dollar. But the pound had another good run, helped by a growing confidence that Britain would vote to Remain within the European Union at next month's referendum.
The European single currency had a torrid week having traded close to $1.14 against the US dollar at one point, only to drop back down below recent support levels of $1.12. The move lower was in fact more to do with changing investor sentiment back in favour of a stronger US dollar, rather than any compelling negative changes to the Eurozone economic wellbeing.
Europe’s international trade in goods did report a surplus of €28.6billion for March 2016, with exports to the rest of the world totalling €177billion, down 3% on the same month a year ago. However, imports fell by a larger amount – down 8% – meaning the surplus was healthy.
MYTH 1 - Immigration - Restricting Migrants from the EU will lead to better prospects for UK workers.
Although there are manifold socio-political contentions,it is difficult to conclude that the UK economy has not benefited from the increase in immigrant labour from Europe (immigration from outside the EU is another matter). Most immigrants are working age and relatively well-educated, offsetting the negative effects of the country’s own ageing population. However, public services may come under pressure if migrant workers stop returning to their native countries upon retirement.
We have all read in the press recently about the demise of BHS, but the most worrying part of the story is how this will impact UK taxpayers and BHS pensions.
UK taxpayers will have to cover the statutory redundancy pay of the company’s 11,000 staff. Based on previous failures, such as Comet, City experts believe the bill will top £40million.
At the same time, every worker in the UK who is a member of a company pension scheme will have to help fill a black hole estimated at £571million in the BHS pension scheme. This is because the Pension Protection Fund, which steps in when businesses collapse, gets its money through a levy imposed on all company schemes.
The Euro has given up some of its recent gains against both the pound and the US dollar over the course of the week. Both currency pairs have seen very little volatility with the price ranges contained within one and a half cents.
The week started off reasonably positive for the Eurozone with Germany’s manufacturers reporting uplift in new order activity, up 1.9% in March from the month before.
