IMPORTANT COMMUNICATION - THE EU REFERENDUM
The British electorate has given its verdict on the UK's membership of the European Union in no uncertain terms. In spite of the more emotional appeals to the contrary, this is not a disaster.
Contrary to many polls and the bookmakers predicting the UK to remain in the EU, but the UK public have voted to leave the EU. Truthfully, many are surprised by the outcome.
We are likely to see volatility in the currency markets as well as the stock markets for the next few days. At the time of writing, Sterling had not fallen as predicted. Prior to the result announcement, the pound was trading at approximately €1.30 this morning, but as the result was announced, the pound dropped to €1.23, and continues to range between €1.22 and €1.24 against the Euro.
After months of campaigning and ensuing result uncertainty, referendum – or neverendum – week was finally upon us. Such has been the level of global interest surrounding this historic vote that most other market influencing variables took a back seat to what has been described as ‘the biggest decision in a generation’.
Foreign Investment - Foreign investors will withdraw from the UK if it were to leave the EU.
There are concerns that foreign investors will withdraw from the UK if the country leaves the EU. So far it is difficult to conclude that even the prospect of Brexit is slowing the flow of inward investment - across a number of measures, 2014 was a record year. Surveys indicate that research and development will be the focus of investment projects over the coming years - an area for which the UK is very attractive.
Until recently investors tended to see the possible departure of Britain from the European Union as a domestic issue. In the last week that parochial view has broadened. Central banks in The United States and Japan both postponed changes to monetary policy, at least in part because of the uncertainties posed by next Thursday's referendum.
At the Bank of Japan some board members "were concerned that even if the BOJ acted this week, the market impact of its move would fade if a 'Brexit' vote rocked global financial markets".
In the States, Federal Reserve chairperson Janet Yellen said it "could have consequences for economic and financial conditions in global financial markets".
Sterling felt the weight of several EU referendum opinion polls released over the weekend: both indicating the Leave campaign has nudged into the lead ahead of the 23 June vote. A YouGov poll for ITV placed Leave ahead on 45 to 41 per cent, while a new poll by Opinium for The Observer showed the Leave camp has a three point lead on 43 to 40 per cent.
Public Finances - The UK's budget balance would improve substantially if we were to leave the EU.
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.
