THE referendum on Britain’s EU membership continues to stir much debate. Whatever your views, one of the losers from a Brexit is likely to be your investment portfolio, in the short term at least.
Stock markets do not like uncertainty, and with business leaders already highlighting the potential risks of an exit from the EU, it is possible to paint a rather gloomy short-term scenario.
We have already had a precursor to the potential reaction of financial markets to an Out vote, with sterling having weakened since the referendum date was established.
Sterling would probably tumble further if the UK elected to leave the EU, while UK gilts and corporate bonds could suffer, leading to higher borrowing costs for the UK government and for companies.
As a result, investors may wish to look further than the UK, at least temporarily, with greater investment opportunities potentially being presented overseas, including Europe.
Experts are also worried about the potential impact on trade and foreign direct investment, noting that negotiations to agree bilateral agreements could be complicated and the UK could lose out to rivals such as Ireland.
Robust growth is needed to sustain current levels of UK debt, yet it is entirely possible that reduced immigration following a Brexit could lead to a slowdown in the UK’s economic growth while the City of London employment levels could also suffer.
With London having about 12 per cent of the UK’s population but accounting for a quarter of its GDP, its success is disproportionately important.
Given the dominance of the finance industry in contributing to Jersey’s economy and the strong link with the City of London, Jersey will not be immune to the consequences of the final decision.
Local investors should review their portfolios now to ensure that they are as prepared as they can be for the impending market fall-out following the outcome of the referendum on 23 June.
