Friday 11 March 2016 12:27 pm

EU referendum: Housebuilders, mid-caps, banks and retail will be the sectors worst-hit by a Brexit, says UBS

The Brexit debate continues apace – and now UBS Wealth Management has waded in on the argument, pointing out some of the sectors most at risk if the UK votes in favour of leaving the European Union. 

The good news is fears around Brexit have already been priced into the market, said Caroline Simmons, deputy head of the UK investment office at UBS Wealth Management. 

But because of that, the FTSE 250 will probably be more at risk than the FTSE 100. 

“While the FTSE 100 could experience some selling pressure due to its large international investor base, the currency boost to the large cap index from a weaker pound, combined with lower exposure to the UK economy will likely win out, leading the FTSE 100 to outperform the FTSE 250.”

So who will be the biggest losers? Without further ado…

1. Banks

Simmons said the banking sector is "one of the most exposed to changes in the UK's relationship with the EU". That's because a widening of credit spreads or a change in the UK's sovereign wealth rating could push up borrowing costs for banks, which would hit their margins.

Domestic banks could be hit harder than others because of their exposure to the UK's property market and business' capital expenditure.

2. Housebuilders 

Shares in the likes of Barratt, Berkeley Group, Persimmon etc have soared in recent months, as the government does everything in its power to encourage housebuilding. 

But Simmons pointed out that as housing demand is driven by consumer sentiment and credit conditions, housebuilders will suffer badly from any deterioration of sentiment – and with banks' costs increasing, they'll be less enthusiastic about lending to mortgage borrowers.

3. Retail and leisure

Another casualty of deteriorating sentiment. While retailers may be given a bit of a boost if the Bank of England provides cuts interest rates after a Brexit, any ensuing weakness in the economy could cause people to rein in their spending.

4. Insurance, real estate and utlities

Simmons said she selected these because they're so heavily exposed to the UK economy.