Macroscope | ‘Brexit’ is the last thing Europe needs right now
The UK’s potential exit from the EU is needed like a hole in the head.
The market has spoken.
In last month’s survey of global fund managers published by Bank of America Merrill Lynch (BAML), the threat of a British exit from the European Union —Brexit — did not even figure in the top four so-called “tail risk” events: an external shock that causes a sharp market sell-off and potentially threatens the financial system.
In this month’s poll, however, which was published on April 12, a Brexit was the second most important tail risk after the failure of central banks’ ultra-loose monetary policies.
Over the last several months - and especially since Boris Johnson, the mayor of London and a prominent member of the UK’s ruling Conservative Party, announced in late February that he would campaign for a Brexit in a high-stakes referendum on June 23 - international investors have become a lot more concerned about the economic and political fallout from a withdrawal of the EU’s second-largest economy from the 28-member bloc.
In a report published in early March, BlackRock, the world’s largest asset manager, said that its “bottom line is that a Brexit offers a lot of risk with little obvious reward”, with “sterling most vulnerable to Brexit fears” and the London property market particularly at risk, given that a sizeable portion of demand for office space is tied to Britain’s access to the EU’s single market.
Even US president Barrack Obama weighed into the debate last week, warning in London that the UK would lose influence in Europe if it left the EU and that it would be forced to go “to the back of the queue” in its efforts to sign a new trade deal with Washington.