There is near unanimity in the monthly Centre for Macroeconomics survey that the Brexit question will increase financial volatility and will pose economic costs in the medium term.
In late February, UK Prime Minister David Cameron announced that the referendum on the country’s continued membership of the EU would be held on 23 June. Over the following weekend, a number of leading Conservative MPs announced their support for the campaign to leave the EU – ‘Brexit’. The pound sterling declined as trading opened on the Monday morning, losing close to 2% of its value relative to the dollar and 1.5% relative to the euro on the first day of trading following these news stories.
A number of commentators have expressed concern that this is merely the tip of the iceberg and that the run-up to the referendum will be a period of significant financial volatility. According to these observers, this presages the economic and financial troubles that Brexit would bring.
Others have pointed out that financial markets are volatile by their nature, tend to over-react and are hard to forecast. Moreover, the FTSE 100 stock market index actually increased on the Monday following the referendum announcement and held its value through the following week.
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