Focus Group: Anxieties over Brexit effects
More than 70% of respondents to this month’s Focus Group on the possible British exit (Brexit) from the EU say that the European economy would be worse off if the UK votes to leave in this month’s referendum.
A UK investor says: “Short and medium-term uncertainty would compound existing global concerns and further deter investment across Europe and particularly in the UK.”
A German pension fund argues that Brexit would “reduce the scope of the free market”, where it would have an immediate, albeit small, effect. The fund adds: “In the long term, it reduces voting power for the economically savvy countries in opposition to the life-optimising countries. This reduces economic welfare in the long term.”
However, a Dutch investor says: “A Brexit would take place over many years of negotiations, during which time policy makers and industry leaders can adapt accordingly.”
A French pension fund adds: “An economy the size of Britain with one less layer of bureaucracy to contend with would be more dynamic and would have a knock-on effect on Europe.”
At the same time, 77% say that leaving the EU would be generally negative for the economy of the UK.
A UK investor says: “Brexit would be an unmitigated disaster for the UK. There is no plan of how to operate in a Brexit world. The Leave campaign have some nebulous ideas that they can keep all the benefits of trade with Europe without any costs or regulations. This is like being told you can get divorced at no cost and still sleep with the ex three nights a week.”
However, another UK investors says: “Other countries like Norway and Switzerland have thrived, despite being outside of the corrupt, bureaucratic euro-zone.”
Among the ways the UK would suffer, 70% of respondents say its economy would be hurt in the long term owing to the difficulty of reaching trade agreements with EU countries. Twenty-four (58%) respondents identify diminished trade flows with EU countries as a potentially negative consequence, while 53% say the UK’s weaker political influence as a result of departure from the EU could hurt the economy.
More than half of respondents (56%), however, see better border control and enhanced security as long-term benefits for the UK economy post-Brexit, while 54% say diminished regulatory pressure and liberalisation will constitute a long-term positive.
A UK pension fund says: “It’s about sovereignty, not economics.”
Although less than one-third (28%) of respondents say Brexit would irreparably destabilise the EU as a polity, more than half (51%) say the impact on political stability in the EU is impossible to predict. Yet, three-quarters of respondents agree the Brexit vote reflects a wider dissatisfaction with governing institutions that the EU and its member states urgently need to address.
Almost three-quarters of respondents say that the impact of Brexit on London’s dominant position as a financial centre would be negative. And more than half (55%) of investors polled say the impact of Brexit on other European financial centres, such as Frankfurt, Paris and Zurich, would be positive.
More than half (53%) of investors polled say the impact of Brexit on the European institutional investment sector would be negative, while just over a quarter (26%) say the potential impact would be somewhat negative.
One-fifth of investors polled are in favour of Brexit, considering the impact on their pension fund, while 60% are against. About 15% are neutral on whether the UK should leave the EU.
More than half of respondents (55%) say the impact of Brexit on the UK equity market would be somewhat negative. However, investors strongly disagree on the likely impact on UK Gilt yields. More than a third say the impact would be somewhat negative, a fifth say it would be neutral and almost a quarter believe that it would be neutral.