PA ANALYSIS: Time for a referendum risk-off move?

Prime Minister David Cameron has proclaimed victory in his battle to agree reforms for the United Kingdom’s European Union membership terms.

PA ANALYSIS: Time for a referendum risk-off move?


Cameron was in a fairly small minority of people who claim the deal struck will make any significant differences. Peoples’ views either for or against remaining will not be changed by the deal.

The real significance of the deal was more as a starting gun for the referendum campaigns. While an official date is yet to be confirmed, the government is doing nothing to convince the many who consider June will be the time that they are wrong.

A YouGov poll released on Friday reporting 45% of respondents said they would vote to leave the EU and 36% would vote to remain added some spice to the mix. There have also been polls showing almost the exact opposite however, so the outcome is still very uncertain.

Investors will be taking the news in over the coming weeks and many will be asking whether now is a good time to take some risk off the table, particularly in terms of UK assets.

According to Hermes Investment Management’s chief economist Neil Williams the referendum on EU membership is the big ‘known unknown’ for UK assets.

“Should [Brexit] go ahead, the mark-down in assets would be greatest on a ‘hard exit’ than the more probable if there is Brexit ‘softer version’ akin to Norway/Switzerland’s associate membership,” Williams said. “As a small open economy, removal of trade barriers and labourm migration have probably benefitted the UK. Critically, Brexit risks obfuscating regulation negotiations, & the UK’s strong FDI-appeal,” he added.


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