Brexit seminar Liverpool - exploring the myths and facts

With 50 days until the Referendum, James Hedley, investment director, hosted a capacity event entitled, ‘Brexit – Exploring Myths and Facts’, in Liverpool.

Two different yet complimentary presentations were given by David Page, Senior Economist at AXA Investment Managers and Ed Smith, Asset Allocation Strategist at Rathbones. The speakers’ brief was to provide a rare non-political and thus objective assessment: with a clear focus on the impact on the UK economy and the markets.

The capacity audience indicated how we are all seeking facts rather than spin, and indeed were given a clear and concise description of the two distinct scenarios.

AXA-IM forecast that a Brexit decision would result in a 2%-7% lower level of economic activity by 2030 compared with remaining in the EU (HM Treasury estimate of 5-8%, OECD 3-8%). Whilst Brexit would provide freedom for the UK to craft its own Free Trade Agreements (FTAs) with fast growing regions of the world, AXA-IM suggest it would be a challenge for the UK to replace agreements with and via the EU that currently cover around 85% of UK export markets.

Rathbones judged that to an extent the stockmarket is factoring into prices, the possibility of a Brexit. Thus, if the remain vote wins, there maybe a short term boost to the markets. The UK is a leading global trading economy and this is reflected in some 3/4s of FTSE100 earnings being sourced overseas. The FTSE 100 is likely to be relatively immune due to its global outlook, but more domestically focused small and mid cap stocks are more at risk.

The speakers left the audience with an overall impression that whatever the outcome, it would not be catastrophic, but clearly as France has said, ‘there will be consequences’: and their rational detailed assessments bought some evident relief to the audience.

A show of hands, after a non-partisan question and answer session, was a surprise. The ‘remain’ vote was best supported, yet very close behind were the ‘undecideds’, with the ‘exit’ vote in a minority. Whilst the betting suggests a clear lead for the ‘in’ campaign (c.75%), the conclusion was that the ’undecideds’ have the ability to determine the final outcome – and both sides still have work to do to make their case!

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