A Brexit vote would dramatically increase risk premiums on UK equities, one macro-research house has argued, wiping more than £400bn off the market.
Absolute Strategy Research has argued that the risk premiums attached to UK equities could rise to from 5 per cent to 6 per cent after a vote to leave, implying a 20 per cent reduction in their value.
Absolute head of research David Bowers says: “The UK’s equity risk premium is lower than you might expect for current levels of policy uncertainty.”
And chief investment strategist Ian Harnett adds: “A 20 per cent fall in UK equities could wipe £450bn off the UK market. That would be a big hit for UK pensioners."
Harnett also notes that foreign investors would sufer in particular because sterling would also drop in the event of Brexit.
“If Sterling breaks $1.38 then there is little technical support before parity – that implies a 28% fall,” he said.
However, the good news is that the research house maintains that there is currently only a 24 per cent chance of the UK voting to leave on 23 June.