Six weeks to go before the Europe referendum on 23 June and both sides are campaigning hard. Boris Johnson says the only safe option is to leave, while Bank of England governor Mark Carney cautions that it’s a dangerous choice, as everything from employment to food prices will be affected.
We take a look at the main implications of the vote on your finances.
1. STOCK MARKETS
Any vote to leave is likely to mean falling stock markets, as investors hate uncertainty. This effect has been seen already. Foreign direct investment in the UK has fallen and stock markets have been volatile.
On the flipside, investors will cheer a vote to remain with a spurt of fresh activity on the stock markets. So expect a relief rally on the blue chip indices, FTSE 100 and FTSE 250, if the In camp wins.
In the mean time, around 42 per cent of private investors feel stock markets are too risky at the moment, according to a survey from The Share Centre. It has found investors tapering back their risk.
“Personal investors are hedging their funds towards safer options until the mist clears,” says Richard Stone of The Share Centre.
Fund managers have been preparing for turbulence around the referendum for some time, so are unlikely to be caught offguard. Nevertheless, The Share Centre highlights Fundsmith Equity, Woodford Equity Income and Old Mutual Global Equity Absolute Return as medium-risk funds which could weather the markets well.
Gold prices could rise if the UK votes to leave. It’s already been among the best-performing assets this year, and has risen to a 21-month high as a jumble of issues from the risk of a global recession to turbulence in China have given investors the fear factor.
An ounce of bullion is up 21 per cent so far this year, from $1,060 on 1 January to $1,285 currently.
Michelle McGrade of TD Direct Investing says those interested in gold could consider buying an exchange traded fund which invests in bullion, such as the ETFS Physical Gold fund. “It provides a return equivalent to the movements in the gold spot price,” she says.
Property prices could fall if Britain votes to leave, some are speculating. It would likely result from cooling demand from overseas buyers, who are less likely to buy property in a climate of uncertainty.
Indeed, there’s been evidence of weaker demand at the higher end of the market this year, and Brexit risk could be a factor.
Chancellor George Osborne has said he expects “significant” falls in house prices too – without saying why – possibly because rising property values are one thing Britons hold sacrosanct and he is campaigning for the remain side.
“I am pretty clear that there will be a significant hit to the value of people’s homes and to the cost of mortgages. That is just one example of the kind of economic impact we get from leaving the EU,” he said, adding that Treasury analysis backed him up.
History shows the number of property transactions fall in the run-up to an election, says Naomi Heaton of London Central Portfolio. “Osborne is correct that the property market does stall in the face of investor uncertainty,” she says.
“All the evidence, however, suggests that markets rally thereafter, regardless of the outcome,” she adds. This referendum is a different situation to a general election, so it is hard to draw direct parallels.
But it’s also worth remembering there are fundamental reasons why house prices have been rising so fast in the UK – chiefly chronic lack of supply. This has also made buy-to-let a great investment. It’s hard to see that reversing. Property is also considered a safe haven by many investors.
As for mortgage rates, anyone worried about rates rising could act to secure a good fixed-term rate now.
4. THE POUND
There’s been a lot of hubbub over the potential effect of a leave vote on sterling. Some say the pound will fall rapidly, and it has been weakening against the euro recently. A large fall in sterling will raise the cost of imports, but there’s another side to it too, says Jason Hollands of Tilney Bestinvest.
“While a weaker pound is unwelcome news for anyone planning to book a summer holiday in Tuscany or a ski holiday in France, the reality is that there are also benefits to a weak pound, which would make British exports more competitive internationally,” he says.
“In fact central banks around the globe have been implementing money supply policies aimed at achieving weaker currencies.”
5. THE ECONOMY
It’s hard to argue the economy will be better off in the near future if Britain votes to leave Europe. The Bank of England’s Carney has even suggested recession would be on the cards. Supports of the leave campaign argue in the long term, we'll be fine, and maybe even better off.
Read more: Support UK tech or face economic doom
Meanwhile, to keep your savings safe, the Financial Services Compensation Scheme protects bank deposits up to £75,000 per person, per banking licence.
Some banks have different names but operate under the same banking licence, so if you have large deposits in more than one bank, check they are both covered to the full amount.