Exit from Europe and impact on investments

RobStaffs

I get the feeling this is now more than a possibility. Everyday positions are becoming entrenched . What would be the impact of a UK exit on pensions and other investments in funds etc?

planteria

my first thoughts are that it is essential that we leave the EU--in it's current form. there could be some serious volatility as a result of the process, but long-term, the effect should be minimal. we are in a World market anyway.

le_loup

RobStaffs wrote: »

I get the feeling this is now more than a possibility.

I agree. It now, unfortunately, looks inevitable.

It's now up to investors to spread their investments further abroad but meanwhile, try to counter the constant negatives from the majority of the media on people we know.


As people found in the 1930's, a lie said often enough becomes the truth.

Linton

I think the impact would be major and for that reason I am ensuring that my % investment allocation to the UK is steadily reduced. Day to day news doesnt ususally affect my investing but in this case I believe the effects could last decades.

Some possible impacts.......

1) Major global companies manufacture in the UK because of easy access to the European market. Were the UK to leave the EU, the EU would be likely to provide large incentives for those companies to move with significant impact on both direct employment and employment in the supplying industries. Any new large scale foreign investment in the UK would be unlikely.

2) At the moment London is the largest financial centre in the EU and is responsible for a significant part of the UK's income. With the UK no longer a member one can see the EU implementing measures to the advantage say of Frankfurt and the disadvantage of London.

3) As regards the FTSE indexes in the period leading up to the referendum one can predict investors world-wide taking a similar view to me and would therefore be likely to move out of the market precipitating a major fall. It is likely in my view that many would not return.

4) The UK exporting industry gains from free trade deals negotiated with the help of the size of the EU market. Why would the US and China agree good terms to get access to the much smaller UK market? Why would the EU provide as good terms to the UK as it would agree with much larger markets elsewhere?

Perhaps these downside risks would be balanced by major new opportunities, unfortunately I cant see any of the size of the risks I have outlined above.

However I dont believe it will happen. Were there to be a referendum economics and the fear of unemployment would win out.

Onawingandaprayer

Don't worry it won't happen. Ed will get in, bailed out by the SNP and everything will be fine :eek:

lejog2003

Fortunately theres about zero chance of it ever happening, support for EU membership was recently recorded at a 23 year high. (56% for - 36% against) And if it ever came to a referendum business leaders would be wheeled out to spell out the disastrous consequences for jobs and wages.

Edit: Unless there's a significant change in these polling figures at any time, I cant see the market ever pricing in an exit either. But its a poll I do very much keep an eye on.

talexuser

I think it would be a disaster for manufacturing. All the car and electronics companies etc would relocate to within the EU for their next round of investment. I can't see how those thousands and thousands of relatively well paid jobs would ever be recreated by "new" opportunities.

bowlhead99

The UK and German press are all over the comments from Merkel that if we want to insist on not having free movement of people and product between ourselves and mainland Europe, then they would be happy for us to drop out of the European system and do our own thing - she would abandon her efforts to keep us in, because somewhere along the line a point of no return would be reached.

Germany has their own immigration problem too of course, being a prosperous country in the heart of Europe with the highest number of non-German born residents ever - but perhaps are more politically sensitive about not being seen to be calling out foreigners as bad, given it kicked off a war last time. Merkel does not speak for all current and future german policiticians. But I digress.

If the papers are full of the potentially inflammatory comments on one hand, and Cameron trying to quieten it down and dismiss it as speculation on the other, you could look to see how our markets have reacted to the threat. FTSE down 20pts (less than a third of a percent, a nothing of a movement), FTSE 250 down 5pts (much less). So basically they haven't reacted one jot.

You can say that means markets don't care about us leaving Europe but that wouldn't be true. It just means the latest 'threat' being reported everywhere has not been taken at all seriously by the market.

It's true that in a referendum the stark consequences of getting out of Europe would be laid out pretty clearly. The luxury of existing outside Europe and avoiding the bits of it you don't like while being taken seriously on the bits you do like, probably doesn't exist. In the same way rUK said to Scotland, you can go off and do your own thing but you can't sit here and tell us what to do and only keep the bits of the Union you like. There is much to lose for our economy by our leaving - it's a large market to say goodbye to, as well as a large pool of resource.

According to a report last week by Pinsent Masons/CEBR, China is set to invest £105bn in British infrastructure by 2025. They have plenty of money to spend wisely and tactically for a return. Apparently we rank third in the international infrastructure investment attractiveness leagues. So, forging alliances with wealthy other nations can potentially take up some of the slack caused by reduced inward investment and reduced sales opportunities by hopping out of Europe.

However, our position in the leagues is partially dictated by where our economy sits within Europe and what that means for our GDP and the prosperity of our companies that use the infrastructure the Chinese would like to help us build. At the moment we can welcome the Chinese over here and educate them on how to operate within the framework of EU regulations; accessing their capital on projects that improve productivity of our domestic firms and the efficiency of our economy. A good moneyspinner. However, if what they are investing in is no longer properly within the EU, we won't be so high on the attractiveness scales for inward investment, whether internal infrastructure or outward-looking manufacturing or services etc etc.

There is simply too much potential to be lost from a Europe exit that politicians would be mad to wind back the clock on our economy just to keep out a few Romanians. And if some are power hungry and want to do it, the majority of public opinion (not to mention the opposition MPs) would not exactly be in favour despite the growing UKIP scaremongering.

rpc

Linton wrote: »

3) As regards the FTSE indexes in the period leading up to the referendum one can predict investors world-wide taking a similar view to me and would therefore be likely to move out of the market precipitating a major fall. It is likely in my view that many would not return.

Just look at the damage one poll suggesting Scotland might vote Yes caused to the FTSE and the currency. If the polls suggest a clear No to leaving the EU, I don't think the markets will care. If it is close, or in favour of leaving then the damage will be significant.

BarleyGB

Linton wrote: »

I think the impact would be major and for that reason I am ensuring that my % investment allocation to the UK is steadily reduced. Day to day news doesnt ususally affect my investing but in this case I believe the effects could last decades.

Some possible impacts.......

1) Major global companies manufacture in the UK because of easy access to the European market. Were the UK to leave the EU, the EU would be likely to provide large incentives for those companies to move with significant impact on both direct employment and employment in the supplying industries. Any new large scale foreign investment in the UK would be unlikely.

2) At the moment London is the largest financial centre in the EU and is responsible for a significant part of the UK's income. With the UK no longer a member one can see the EU implementing measures to the advantage say of Frankfurt and the disadvantage of London.

3) As regards the FTSE indexes in the period leading up to the referendum one can predict investors world-wide taking a similar view to me and would therefore be likely to move out of the market precipitating a major fall. It is likely in my view that many would not return.

4) The UK exporting industry gains from free trade deals negotiated with the help of the size of the EU market. Why would the US and China agree good terms to get access to the much smaller UK market? Why would the EU provide as good terms to the UK as it would agree with much larger markets elsewhere?

Perhaps these downside risks would be balanced by major new opportunities, unfortunately I cant see any of the size of the risks I have outlined above.

However I dont believe it will happen. Were there to be a referendum economics and the fear of unemployment would win out.

None of this would happen overnight, and its extrememly doubtful it would happen at all. Pure speculation.

I personally think that without the binds of the EU and paying them circa £10 billion a year for the privilage, that the UK could flurrish. UK is uniqely placed with links to the USA, Asia & Commonwealth etc

Many of the financial institutions arent in the UK because of us being in the EU, its because we're the 6th biggest economy in the world, stable government, corporate governance and laws. Also strong networks, R&D, technology and we speak English.

I think we'll be far more relevant as an independent country than the failed superstate project the EU has become.

Worst case scenario id rather be out, masters of our own destiny, even if they meant we were a bit poorer.

BarleyGB

rpc wrote: »

Just look at the damage one poll suggesting Scotland might vote Yes caused to the FTSE and the currency. If the polls suggest a clear No to leaving the EU, I don't think the markets will care. If it is close, or in favour of leaving then the damage will be significant.

Completely different situation to the UK leaving the EU, we have our own stable currency. Far more stable than the failed Euro project.