What does the EU referendum mean for the UK market?

Both the Remain and the Leave campaigns are stepping up their activity ahead of the EU referendum on June 23rd. With the polls virtually split down the middle, nobody can be sure of the result – nor of the impact that leaving the EU would have on the UK market.

The general consensus seems to be that a Brexit is unlikely. The international community is rallying round in support of Britain remaining in the trade block. However, a surprise win for the leave campaign could potentially result in a short-term shock to the domestic investment markets.

Should we decide to leave the EU it is likely to be a lengthy process, and may result in investments being delayed while we negotiate the terms of our exit and future trade regulations with the EU.

The impact of victory for the leave campaign would depend entirely on what sort of new agreement could be negotiated. A strong trade deal on the back of a leave vote could result in increased investment from overseas. On the other hand, a win for the Remain campaign is likely to provide a great deal of assurance to investors and Britain could benefit from an initial influx of investment from overseas.

Investment markets are inherently unpredictable at the best of times, so it’s exceptionally difficult to predict the impact of the referendum results with any degree of certainty. It is, however, safe to assume that investors will play it safe until this process is over and done with.

This has already had an impact on the UK economy, particularly in the currency markets, with the pound falling significantly against both the dollar and euro in the first four months of the year. One thing that is clear is that investors prefer certainty over volatility. As a result, it’s likely that market growth will remain slow until well after June 23rd.

The market faces uncertainty over the coming months and potentially beyond that, depending on the outcome of the referendum. So we’re advising our clients not to try and time the markets – nobody can accurately predict the outcome of the vote, or the impact either result may have.

Ultimately, our message to clients ahead of June 23rd is a quintessentially British one – keep calm and carry on.

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