EU referendum: The time for markets to start preparing is now, says UBS

James Nickerson
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The EU referendum could be held as early as next year (Source: Getty)

The UK referendum on whether the UK should remain in or leave the European Union is likely to take place next year - and markets should prepare now, according to UBS.

In a global research report, the Swiss company said the "most likely date [for the EU referendum] is around October 2016, but conceivably it could come earlier".

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As such, the time for the market to start preparing is now, "given it could have a potentially significant impact on asset prices and volatility, not to mention the real economy", the report added.

Businesses have previously warned against the uncertainty caused by a long build up to the referendum, with investment likely to be affected.

The report by UBS also said if the UK does leave the EU, there is a higher chance of a "soft exit" than a "hard exit".

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In a "soft exit", the UK preserves access to the single market and the freedom of movement, with concerns over the impact on the UK financial sector likely to linger on.

A "hard exit" will mean the UK loses out from trade in goods and services, with a reduction in migration. In this scenario the impact on the economy will be larger, "with GDP potentially falling significantly".

Prime Minister David Cameron is trying to renegotiate the terms of Britain's membership to the EU before holding an in-out referendum, which he has guaranteed by the end of 2017.

However, many campaigning to leave the EU have said Cameron will fail to get the desired treaty change with the EU.

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