It would be rational for the UK to leave EU ASAP – Mirabaud

From an investment point of view it would be rational for the UK to avoid delays in leaving the EU, said Gero Jung, chief economist at Mirabaud.

It would be rational for the UK to leave EU ASAP - Mirabaud

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“The UK will wait a bit before it activates article 50, because it will obviously decrease negotiating power with Europe,” said Jung.

But the chief economist highlighted the importance of gaining clarity as soon as possible post-Brexit from an investment perspective. “We think it would be a good choice by the UK Prime Minister to start negotiations in January already. The sooner we start and we get clarity, the less uncertainty we have and that’s positive for investment,” he explained.

“What we know is that once article 50 is activated we have two years, but it can be delayed if the 27 member countries agree.” But, he said, it would be rational to avoid any delays. The most rational strategy, according to Jung, would be to start negotiations as soon as possible, activate article 50 and then just leave.

Jung went on to explain that he believes the UK will avoid a recession following the leave vote, a contrary view to many industry commentators. “In the medium term, UK’s economic experience will show quite well that you can survive outside of Europe,” he added.

In the short term, Brexit might even be positive for European equities, said Jung. Overall, we shouldn’t forget that the Eurozone economy is improving a bit, he noted. He also said the European Central Bank will do more, which will support riskier assets.

However, he also pointed to the turmoil that lies ahead. “With the stress in Italian banks, the referendum, the possibility that the Italian Prime Minister might resign in October, two big elections next year – it’s a heavy agenda,” said Jung.  

And he highlighted that the income inequalities, including in the UK, have increased quite significantly recently, as well as in the US.

 

 

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