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Brexit uncertainty is slowing UK business investment – Rabobank

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Mar 10, 2016.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

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    Research Team at Rabobank, notes that the UK business investment fell by 2.1% q-o-q in the last quarter of 2015, the largest decline since 2014.

    Key Quotes

    “The decline reflects increasing business risk aversion in anticipation of the referendum on British EU membership held on the 23th of June. We expect continuing softness in business activity during the pre-referendum period because firms will postpone their investments until after the referendum.

    Our view is supported by survey results from the Bank of England which indicates weakening investment intentions in the manufacturing sector (0.2 in December and January, a six-year low).

    As we expect a British vote in favour of EU membership, business investment is expected to pick up in the second half of this year. Our baseline scenario is supported by our view that a Brexit would be undesirable due to the possible economic and political impact. In addition, the settlement between Cameron and Brussels over British EU membership could support his “Remain”-campaign.

    Although some actual commitments were agreed on, such as restrictions to social benefits for EU-immigrants and economic governance, the deal is however regarded as too thin to completely eliminate British antipathy towards Europe.”
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