Head of Employee Benefits at Sanlam UK Elliott Silk said: “It is easy to get swallowed up in the political pantomime which has surrounded the EU referendum campaign, but it is important not to forget the hard facts. The long term impact of such a vote is unknown and this uncertainty will likely cause further volatility in risk assets in the UK and Europe.
“If we were to leave the EU, it is arguable that Britain could see an increase in skilled workers entering the country through tighter migration controls; however, whether the UK gains any powers to restrict the flow of unskilled workers from Europe will depend on its future relationship with the EU and whether it wants to retain access to the single market. Conversely, a reduction in unskilled migration could also cause potential problems for low-wage sectors of the economy that are heavily dependent on migrant labour, such as agriculture.
“A Brexit would give Britain an opportunity to broker its own trade agreements with the rest of the world, something it has not been able to do as part of the EU. Although potentially beneficial, we should also remember that a significant amount of our exports are linked to EU membership. Thus, a renegotiation of a trade agreement, outside of the single market, would be needed if the UK is to avoid paying trade tariffs.
“If a Brexit were to occur, it is fair to say that it would be a negative for the EU; Britain has a world-class financial centre that no other major European city is likely to match in the short-term, is a major contributor to the EU budget (10% of the total in 2015) and is a leading voice for free markets. It is, therefore, unlikely that the EU will ‘play ball’ during negotiations over new trade agreements with the UK in an attempt to discourage other separatist calls that are likely to arise, particularly from the troubled peripheral countries.
“If the country does vote yes to leaving the EU then the biggest impact will be that there is likely to be pressure placed upon the value of sterling. This will benefit those large companies that operate globally and have earnings in currencies other than Sterling, but is likely to make life tougher for those companies focused on the domestic market. This means it is more important than ever to have a well-diversified portfolio, both in terms of sectors within the UK and regions globally. Although client portfolios do have exposure to UK equities this is balanced against a range of overseas equity funds and other asset classes such as fixed income. Exposure to overseas equities is going to be vital in navigating the coming months; the focus of investment portfolios being balanced with exposure in regions outside of the UK will help to limit the impact of any volatility seen in the UK markets.
“Whatever the outcome on Thursday, it is vital that people do not bury their heads in the sand and should fend for themselves in terms of savings. By putting away a set amount of money each month, people can, as far as is possible, ensure that their financial stability is not entirely dictated by the government.”
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