Among the issues raised in the Brexit referendum is trade and investment. What would be the economic impact on stock and shares on firms if A Leave Vote carried the day, considering that UK is a very important trading partner? Already, the sterling is experiencing a weakness of the highest level, since 2010. In addition, since the announcement of the referendum by UK’s Prime Minister, David Cameroon in 2015, foreign investment in the UK have fallen by an all-time low by 2.1% in the last quarter of 2015.
Currently, many investors are building up cash reserves to secure themselves from the uncertainties the In-Out vote may bring in the stock markets. However, some investors foresee some positive opportunities that the June 25th vote could bring to the securities markets. For example, an Out Vote could see the continuity of UK’s equities. This will only be positive to SMEs unlike on global companies that may opt to leave UK, in order to continue enjoying the EU market and support. SMEs are more likely to benefit from the weakening of the pound if an Out Vote carries the day since most of them are not dependent on the EU market, the share prices may be toppled may have to shoot up.
However, a Leave Vote has a negative effect on the returns on investment. The rates will be slashed, hence reducing the attractiveness of UK assets, due to the weakening of the pound. In addition, the UK equity market would be polarised since share prices would fall in the domestic and retail banking sectors but for staples such as beverages and tobacco, they are most likely going to be the winners of the Leave Vote.
A European Union exit would result to a relocation of the global firms in order to set camp in other EU countries, as they would no longer be pass ported into Europe. In addition, UK would impose trade tariffs, resulting to a reversal of foreign direct investment. This would lead to an increase in share prices on SMEs operating within the UK.
Many companies across the UK believe that an exit of some kind may be a good thing. James from key person Keyman Insurance believes leaving the EU could give a boost to those companies that are currently suffering from red tape and restrictions imposed by the European commission. Allowing the UK to make its own decisions may mean relaxing compliance issues giving a boost to smaller companies and business.…