There is unlikely to be economic benefit in leaving the EU
- Monday, May 22, 2017
After the stormy first quarter, it appears that markets may be entering a consolidation phase, while they search for new direction after what turned out to be a clear overreaction in January.
There is plenty to fret about on the political front, as the UK’s EU referendum draws nearer The relative uncertainty created by the Brexit referendum has started to filter through into UK economic activity figures, where construction, industrial output and now even the mighty service sector are all being reported to have hit stagnation over the recent months. Together with an increasing number of forecasts by various national and international bodies of the relative economic cost a Brexit would be likely to inflict on the UK economy it is becoming increasingly clear that there is unlikely to be economic benefit in leaving the EU. If the Scottish referendum of 2014 is anything to go by then the likelihood of a ‘Leave’ majority in the 23 June vote is reducing. London’s preference of a ‘Remain’ supporting mayoral candidate over a ‘Leave’ advocating candidate may also be seen as a first test of the electorate’s June voting intentions.
This will still cost the UK the economic growth momentum it carried through from 2015 and could render the first half of 2016 a bit of a lost six months as markets crab along. However not all is lost for the second half of 2016, because the weakness in £-Sterling, which the uncertainty also brought with it, should have allowed British businesses to reposition themselves with more competitive prices in the Global markets. We should also see the temporarily halted investment projects be kicked-off fairly quickly in the second half as well. Historically this would have resulted in a not insignificant economic stimulus and so in the coming month it will be advisable to look ahead, rather than behind for any clues as to where the rest of the year will go.
Chris DaviesChartered Financial Adviser
Chris is a Chartered Independent Financial Adviser and leads the investment team.