After more than six months of headlines being dominated by oil prices and China’s growth slowdown, Britain’s impending EU referendum has begun to capture the media’s attention following last month’s release of the official date (23 June this year).
On the day this was announced, Mayor of London Boris Johnson publicly backed an exit from Europe, contributing to a 282 basis points fall in the FTSE 100 over the next two days.
Performance of index since 22/02/2016
Source: FE Analytics
Investors may be forgiven for becoming spooked by negative media attention and ominous statements released by fund managers, but how much impact will the referendum really have on our home market and what will happen to the UK economy if we leave? 
“There’s [historically] more restlessness among the natives and even more spin and lies from the self-serving elite in Brussels,” said Keith Ashworth-Lord (pictured), manager of the five crown-rated ConBrio Sanford Deland UK Buffettology fund.
“I really think it has come to something when the Chancellor of the Exchequer goes to a G20 summit and talks down the prospects of an independent British economy to suit his agenda for remaining in the EU.”
“Personally I think that after a period of readjustment – which would likely be accompanied by stock market turbulence – a sovereign and free UK economy would soar from the ashes of the EU project and we would all be much better off.”
A number of notable Conservative politicians support a Brexit, including Lord Howard Flight, chairman of the Flight & Partners Recovery fund and former shadow chief secretary to the Treasury.
“The evidence suggests that a majority of those working in the City are in the Brexit camp and believe that, on balance, the City would be little harmed by Brexit and would have a better future outside the EU,” he wrote in an article on the Conservative Home website last year.
Odey Asset Management’s Crispin Odey and Numis Securities chief executive Oliver Hemsley are also strong advocates of Britain leaving the EU and are active members of the Vote Leave campaign.
However, Brian Cullen, who runs the SWMC UK fund, believes that a Brexit could have a hugely detrimental effect on the market.
“It is a big risk. The one thing I wouldn’t agree with is the people who have said, ‘oh well, whichever way the vote goes it doesn’t really matter’,” he said.
“Referring to our holding in Foxtons, for example, we’ve heard ‘oh well. We might vote to leave but people are still going to move house and it’s not going to make that much difference’. I think that approach is too relaxed.”
“I do believe it’s quite important in the sense that the impact on the confidence of both businesses investing and consumers can be quite substantial.”
“In the long run, as in over the next 10 years, I’m not sure it makes a huge amount of difference. There are interesting arguments both ways. However, I think the short-term impact [of a Brexit] is likely to be quite meaningfully negative.”
In contrast, research director at Hargreaves Lansdown Mark Dampier says that market nerves surrounding the EU referendum are misplaced and are the product of fear-mongering from financial media outlets.
If anything, he believes that markets will suffer a bout of short-term volatility but urges investors not to take money out of UK holdings if their only reason for doing so is that they’re worried about the referendum’s impact on the market.
“I think it’s a prime example of lots of idiotic messaging on both sides of the argument. I’m probably more with Woodford who says that the economic case matters very little one way or the other. There is the political thing where you believe Europe is a particularly democratic and good place to be or whether you think the whole thing will fall apart at some stage,” he said.
“It’s a bit like the arguments we had about Greece – if you go back two or three years, they said ‘on this date we’ve got this big vote and this will decide the EU and the Greek situation’, and then we’d get to it and there’d be another one, then we’d switch to the American budget deficit problem and whether the Congress is going to vote for that, the list goes on.”
“What actually happens is that each deadline stops people from investing and that’s what we’ve seen over the last few years. People say that a Brexit is more likely to prevent people from investing in the UK, or that maybe it will stop people investing in Europe, but that’s a completely barmy way to look at it.”
Instead, Dampier advocates buying into good UK fund managers with long-term track records that are able to navigate all market conditions.
“It will be a bit like the Scottish referendum. What happened afterwards? Not a lot really,” he continued.
“I am amazed when I see headlines stating that fund managers have moved money out of the UK. It all sounds like they’re really on top of things, but actually nearly all of it is nonsense and most of them will lose money by making that action.”
“They’d be far better off going away and playing a round of golf or whatever rather than worrying about short-term volatility. Stop messing around with your portfolio because it will cost you a lot more money in the long run.”
