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‘Brexit’ the biggest threat to the UK economy – Danske Bank

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Jan 11, 2016.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

    Oct 7, 2015
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    FXStreet (Delhi) – Mikael Olai Milhøj, Analyst at Danske Bank, notes that the EU in/out referendum is still lurking, as the negotiation talks between the UK and the EU have just begun.

    Key Quotes

    “The uncertainty about the future relationship between the UK and the EU – and what would happen if the UK votes to leave the EU – remains the biggest threat to the UK economy in coming years. According to a recent Bloomberg survey, we share this view with 56% of the other analysts.

    Looking at the most recent opinion poll from YouGov, it is currently a very close race between the ‘remain’ and the ‘leave’ sides (41% each in the latest YouGov poll). However, many voters are still undecided (18%). A more detailed poll by YouGov reveals that voters are interested mainly in ‘Great control of borders and immigration from EU’ and ‘Limits on benefits EU migrants are eligible for’. ‘Greater powers for national parliaments to block EU policies’ is also important but not quite so much. YouGov has also found that there is a solid majority for remaining in the EU on renegotiated terms.

    Our main scenario is that the EU and UK will strike a deal good enough for the UK to vote for remaining in the UK. This is built on the assumption that the UK gets support from other northern European countries on limiting the access to welfare benefits for EU migrants. We think this is likely, as this topic is also becoming ‘hotter’ in northern European countries such as Denmark, The Netherlands, Belgium, Finland and recently even Germany. This said, we think the negotiation will be tough and we would not rule out the possibility that the UK votes to leave the EU.

    A referendum day has still not been announced but ‘Brexit’ is likely to be a very important market theme until it is.”
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