HALISTER1: U.K. ‘Brexit’ Vote May Create Persistent Uncertainty: Citigroup

U.K. ‘Brexit’ Vote May Create Persistent Uncertainty: Citigroup

(Bloomberg) -- The U.K. referendum on EU membership may spur persistent political and economic uncertainties that may not end even if the country votes to stay, Citigroup economist Michael Saunders writes in client note, dated Friday.
  • The U.K. voting to stay in the EU at the June vote would probably put an end to near-term Brexit risks but could de- stabilize the U.K. govt and could mean more referendums in both the U.K. and other European states
  • The govt has a slim majority and has been defeated in a number of votes in parliament amid rebellion by its own MPs; tensions could continue after the vote and see voter support for the ruling Conservative party fall further
  • Any drift away from the Conservatives would probably prompt investors to put more weight on a scenario of a Corbyn-led Labour govt – which could imply quite marked policy changes
  • A vote to stay may see anti-EU voters shifting their support to UKIP, making the party a kingmaker in a future govt, or could lead to an anti-EU leader taking the reins of the Conservative party, making a second “Brexit” vote possible
  • Continue to put the probability that the U.K. votes to leave the EU at 30%-40%
  • NOTE: The divide in the Conservative Party will take center stage Wednesda and Thursday as London mayor Boris Johnson and George Osborne are questioned by MPs about the economic and financial costs of Brexit
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

People
Michael Saunders (Citigroup Inc)
Boris Johnson (Greater London Authority)
George Osborne (United Kingdom of Great Britain and Northern Ireland)

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