EU referendum: Rathbone Investment Management report dispels five "myths" of Brexit

 
James Nickerson
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Some have said the Swiss model would work for the UK (Source: Getty)

With the EU referendum looming closer and closer, prominent pro-Leave campaigners have labelled tactics by the Remain camp as "project fear".

However, a new report by Rathbone Investment Management has found there will be consequences to either leaving the EU, or remaining a member.

The report, titled If you leave me now, assesses the impact of the referendum on markets, finding the consequences of the result are far more complex than current rhetoric suggests.

Immigration

The first myth is that immigration holds down wages. The evidence, Rathbone says, suggests this has not happened.

That means there won't be wage growth increases or falls to unemployment if the UK leaves the EU.

Trade

Would trade collapse if we left the EU? Well, not if the government negotiates special terms of access to the common market - or a "soft Brexit".

Even under a "hard Brexit", the UK would remain protected from vengeful EU behaviour by global trade rules.

But, admittedly, some sectors would suffer more than others.

Financial

Some have said the Swiss financial services industry has thrived outside the EU, and as such this could be a great model for the UK.

But Switzerland's relationship with the EU, Rathbone says, can't be replicated.

"Evolving legislation could push financial services activity towards the Continent if the UK votes for Brexit," it says.

Public Finances

This myth is that the UK's public finances would improve if it leaves the EU. A simple calculation suggests the country would be £9 billion better off in the current tax year if it did not have to make contributions to the EU.

But at least two-thirds of this saving, Rathbone says, would be eroded by associated losses and compensatory domestic public expenditure.

And aside from this, the greatest risk to UK finances is that Brexit would create uncertainty, which could, by itself, reduce growth.

Foreign Investment

There's been speculation that leaving the EU could lead to a fall in FDI. So far, Rathbone says, it has been difficult to conclude that the prospect of Brexit is derailing investment flows, especially given 2014 was a record year for inward investment.

It says that surveys indicate that research and development will be the focus of investment projects over the coming years, and here the UK has unparalleled attractiveness.

Still, investor uncertainty could adjourn future inflows.

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