“Simulations suggest an initial 1.8-2.25% off GDP from trade and FDI losses, though some offset this by deregulation benefits. Given the perceived threat to growth and the current account deficit, 4.3% of GDP, there would be downward pressure on equities and the pound,” Williams continued. “With rate hikes deferred, short-term conventional gilts may benefit, especially on a hard exit. But, this could be short lived, given about one third of the £1.3trn gilts outstanding is backed by international investors sensitive to currency and ratings risk. And, especially if Brexit reignites risk of Scotland breaking from the Union,” he added.
Coram Asset Management’s Martin Gray noted the uncertainty of the outcome, but despite this is remarkably unconcerned about the referendum’s impact on asset prices and the UK’s economic prospects.
“Most people won’t make their decision until the day or two before voting or even on the morning and it looks pretty 50/50 at the moment,” he said. “I don’t think it’s going to have any great long lasting effect on the UK economy. Short term it may explain sterling weakness.”
Gray noted that many of the biggest companies in the UK draw large proportions of their revenue from outside the country, and outside the continent in fact. Fixed income markets make see a bit more disruption but Gray is far from worried.
“With equity markets, if you look at the FTSE 100 it is an international index, not a UK index so I can’t see much there,” he said. “It could conceivably make debt funding through the gilt market a bit more expensive, but that’s only possibly. Gilts have been a prime asset for a while now.”
As with the politics of the matter, it seems the investment side of things provokes very different opinions.
