FXStreet (Delhi) – Research Team at HSBC, suggests that in 2016 UK is likely to vote for Brexit and while the terms of the exit would be key, repercussions would be felt across Europe.
“David Cameron, the UK prime minister, has promised that by the end of 2017 at the latest there will be a referendum on whether the UK should remain in the European Union. But it is clear he would like to hold the vote in 2016, if at all possible, not least to reduce the uncertainty the event will engender.”
“There would be significant uncertainty in the immediate aftermath of a “leave” vote. The UK cannot negotiate the terms of its exit on a hypothetical basis, so there would be no clarity on what the post-EU arrangement would look like. If the UK remained a member of the European Economic Area, alongside countries such as Norway and Iceland, the economic implications would be very different to those of a complete withdrawal.”
“The UK’s transition to non-EU member status could take up to two years, at which point its membership would end automatically, if no agreement has been ratified by the European Council. The longer the period of uncertainty, the greater the likely impact on investment and growth. Untangling European laws and replacing them with domestic legislation could be a very long process, requiring government resources to be diverted from other areas of policymaking.”
“Also, the future of the UK itself could once again be called into question. If the regional breakdown of the referendum voting showed a majority of Scottish people had voted to stay in the EU, calls for a second Scottish independence referendum would intensify.”
“If there is a “leave” vote, it is highly likely that the UK would seek to preserve the extensive and mutually advantageous goods trade between it and the other EU members. The impact on services trade, which is very important to the UK, is harder to call. For example, some financial services may opt to leave the UK in order to retain full access to EU markets. Depending on the exit agreement, migration flows could be restricted which could reduce the labour supply and risk a loss of competitiveness.”
“From the EU’s perspective, a UK exit would send out the message that EU membership is not a one-way street, raising concerns about other potential withdrawals and denting investor confidence across the region. If the UK were to impose restrictions on migration, it would also be negative for countries that benefit from employment opportunities for their citizens and remittances from the UK.”
Research Team at HSBC, suggests that in 2016 UK is likely to vote for Brexit and while the terms of the exit would be key, repercussions would be felt across Europe.
(Market News Provided by FXstreet)