Britain’s trouble in Europe isn’t worrying the FTSE bulls

THE Prime Minster remains unable to silence his Tory Eurosceptic critics, and the issue of whether the UK should remain in or should exit the European Union continues to rumble on. Despite his major speech on Britain’s membership back in January, when he promised a referendum if the Conservatives won a majority at the next general election in 2015, the recent success of Ukip in local elections seems to be forcing his hand.

Who knows where we’d be on the issue, and to what degree Ukip would be surging in popularity, if Labour was still in power. It seems that whenever a Conservative administration is anywhere near to power, or indeed is actually governing, it’s only a matter of time before the Eurosceptics sharpen their claws and force the issue. This time it is not only becoming a concern for the Conservatives, but for Labour and the Lib Dems also. None of the three major parties have gained from the issue, though Conservative MPs in marginal seats must be particularly fearful about their re-election prospects as the next general election rapidly approaches.

There seems little reason not to explore an opportunity to reform the EU, however. It would be a chance not only to reform our relationship, but every other member state’s too. This is especially pertinent when you consider what Europe has been going through since the onset of the sovereign debt crisis, and that the current monetary set up still has the potential to fall apart.

Why can’t we keep the good bits like the Common Market and get rid of the bad ones? Many of the bureaucratic and unnecessary regulations imposed upon member states really do hamper competitiveness, making it more costly for companies to do business. The topical financial transaction tax (FTT) is a case in point, though it thankfully seems to be losing support from some of the key players in Europe.

The only way to appease those who want us to leave the EU would be to hold a referendum this side of the general election. Of course, the problem is that the British public are most likely to vote “out” at this point in time, and therefore the risks are almost certainly great. And even if a referendum were to result in an “in” vote, it would be unlikely to deter the Eurosceptics from stirring up the issue again in a few years time.

One thing that doesn’t seem to be distracted by what is happening in British politics is the country’s benchmark stock index, the FTSE 100, which has added yet another daily gain to its already impressive run of 11 positive months on the trot. This itself a record for the FTSE. Clients have been attempting to pick the top of the index with little luck so far, and that is despite many technical signals suggesting the index is a little overbought. We’re now within touching distance (only 250 points or so) from an all-time closing high. This may seem like a lot, but at this rate we could be there before you can say “referendum”.

Angus Campbell is head of market analysis at Capital Spreads. You can follow him on Twitter @angusjmcampbell

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