75% of 130 analysts, consultants, journalists, finance specialists, real-sector heads, policy-makers and portfolio managers forecast that the UK electorate will vote in favour of the UK remaining in the European Union (EU) in the 23rd June referendum, in a survey which I conducted between the 10th and 16th May. That ratio jumps to 81% when the 10 respondents who did not have a view are excluded.
By comparison, the latest poll-of-polls conducted by What UK Thinks has the “remain” vote on 52% and “leave” vote on 48% five weeks before this crucial vote. But caution is warranted given the large share of undecided voters, the importance of turnout and differing results depending on whether polls are by phone or on-line. Current prices offered by betting companies suggest a comfortable victory for the “remain” vote.
Of the 130 respondents with a view which I surveyed, 65% forecast that the UK leaving the EU would be negative for the British economy medium-term. 19% forecast that it would be positive and 15% that it would be neutral. This is broadly in line with the view expressed by Prime Minister Cameron and “remain” camp, the Bank of England and IMF.
The risk to the currency is forecast to be somewhat asymmetric. There is an overwhelming view amongst those surveyed that, if the UK leaves the EU, sterling will depreciate while 38% forecast sterling to depreciate or remain stable should the UK remain in the EU.
Specifically, out of 131 respondents, 81% forecast that if the electorate votes for the UK to leave the EU, sterling would depreciate between the referendum and end-year against the currencies of the UK’s key competitors. Only 8% forecast that sterling would appreciate, while 6% thought that the currency would be broadly stable. 6% did not express a view.
But out of 127 respondents, only 54% forecast that if the UK remains in the EU sterling would appreciate. 11% forecast that sterling would depreciate, while 27% thought the currency would be broadly stable. 8% did not express a view.
These survey results tend to back my view, expressed in What to expect in 2016 – same, same but worse, that the electorate will vote for the UK to remain in the EU and that the lifting of this uncertainty will see a reasonably competitive sterling appreciate.
But any currency rally is likely to be moderate given the UK’s structural deficiencies, including a large current account deficit, low productivity and weak wage growth, and a dovish central bank. A “remain” vote will not address these vulnerabilities near-term.
Read the full article on my blog.
