While something of a side story in 2015, the narrative for UK investors has clearly moved bringing the EU referendum to the fore this year, and the more we hear from politicians and corporates, the more the plot thickens.
A look at recent news headlines from across the media tells a widescreen story of the multitude of issues at play – ‘Brexit threat to UK security’, ‘Brexit uncertainty a stress on the pound’, ‘Brexit risk to business confidence’ and ‘Bankers sound alarm bells over Brexit’.
So, what should we do now to prepare ourselves for a possible vote in the summer?
“The danger is that ahead of the vote people just sit on their hands and take no action,” warns Bambos Hambi, head of fund of funds at Standard Life Investments.
“If companies choose to stop investing that is dangerous because it slows the economy, just as the result itself could also be a cause for concern.”
While all indications point to a close vote, Kevin Gardiner, global investment strategist at Rothschild Wealth Management, believes that the pro-EU lobby is “unafraid to stoop to conquer with its headline-grabbing suggestion that Brexit would cost millions of jobs”.
He explains: “Around 45% of UK exports, or 13% of UK GDP, are bought by the EU, directly supporting roughly four million jobs. But they would not all be at risk from Brexit.
“UK–EU trade would not suddenly stop. The EU trades with non-EU countries as a matter of course, on terms that are subject to negotiation, and the UK is itself a significant customer of the EU.”
Contrary to some articles, Gardiner believes we are far from a foregone conclusion in regards to the impact of Brexit on the City.
“The UK’s financial services sector is the largest in Europe, half as large again as Germany’s, and London’s position as a financial hub might be threatened,” he says.
