The investment giant published a paper in March entitled Brexit: Big Risk, Little Reward. It argued that Brexit would hit sterling, potentially triggering credit downgrades, increase gilt yields, pushing up government borrowing costs, deal a blow to domestically-focused UK equities, and put the London property market at risk.
Woodford Investment Management
Commissioned by fund veteran Neil Woodford from Capital Economics, this report poured cold water on hyperbole from both sides. It argued that concerns about foreign investment drying up were overblown, that Brexit would not be a disaster for the City, that short-term economic dislocation and lower migration could offset savings from paying into the EU budget, and that leaving would only have a limited impact on productivity. Overall, it found, Brexit was more likely to be slightly positive than slightly negative for growth, but the report doubted “that Britain’s long-term economic outlook hinges on it.”
The investment manager decided to dispel Brexit myths instead of providing an opinion one way or the other. Challenging the arguments that immigration has held down wages, that trade would collapse post-Brexit, that Swiss financial services are a model to follow, that the public finances would improve substantially, and that foreign investment would all withdraw, it concluded that sterling is likely to “suffer the most volatility” if we do vote to leave.
The hedge fund went all in earlier in the year, arguing that the UK would be a “better place” if it left the EU. Its report, Britain Stands Up – Better to Exit the European Union, argued that, because there is no plausible alternative to London as Europe’s leading financial centre, its position would be safe.
This article appears in the March edition of City A.M.'s Money magazine, which will be distributed with the paper on Thursday 31st March.