Institutional investors in the UK and Europe fear fallout from Brexit but only a minority are making plans to prepare for one, a survey of financial managers and institutions by MSCI shows.
Nearly 40 per cent of asset managers, owners, bankers and other investment professionals say a combination of economic uncertainty, instability and a falloff in investment in the UK constitutes the most worrying consequence of a possible vote by Britons to leave the European Union, according to the poll of 260 investors throughout the UK and Europe.
Still, nearly half of investors say they are currently making no plans to prepare for Brexit, compared with 26 per cent who say they are factoring the possibility of a decision by Britons to leave the EU into financial planning, and 15 per cent who are building a Brexit scenario into financial, operational and organisational plans.
With six weeks to go until the vote, arguments on all sides of Brexit are intensifying. Thirty-one percent of investors cite economic uncertainty as the chief worry of Brexit, followed by 9 per cent who cite political instability and 7 per cent who say Brexit is likely to lead to a drop in foreign investment.
Nearly two-thirds of investors said they fear Brexit sending the pound down sharply, compared with 40 per cent who say a vote to leave the EU would pose a risk to the British stock market. Thirty-four percent of investors say Brexit could lower economic growth.
According to an analysis by MSCI, a bad Brexit – in which Britain’s leaving the EU shatters the Eurozone and drags down growth across the world – could cause an a globally diversified, multi-asset class portfolio to lose as much as 7.3 per cent of its value. A Brexit with limited spillover could result in a loss of 1.8 per cent to multi-asset class portfolios, the analysis by MSCI shows.
A vote by Britons to leave the EU could pressure similar votes in other member countries. Forty-five percent of investors say that Brexit could produce a domino effect, while 28 per cent think an exit vote could lead other states to leave the EU as well.
The survey reflects responses gathered online between 26 April and 12 May from 258 asset managers, banks and other investment professionals from across the UK, Europe, the Middle East and Africa.