Brexit: The run-in to the EU referendum – RBC CM

Sam Hill, Senior UK Economist at RBC Capital Markets, suggests that it is now under five weeks until 23 June when the UK’s referendum on EU membership will take place.

Key Quotes

“With both sides ramping up their campaign activity, it has prompted a steady stream of demand from investors for a recap of where things stand and what happens next.

As of late last week it shows ‘Remain’ leading ‘Leave’ by 55% to 45%. Generally, since last September, support for Remain has been between 50-56% on this measure. This presentation of the poll results has the drawback of excluding those who haven’t yet made up their mind. Often this group is reported to be over 10% of the electorate. So with a sizable proportion of undecided voters, and a reasonably close split between those that have made up their mind, it is difficult for market participants to confidently infer which side with come out on top at this stage.

The other indicator available for those looking for insight on which way the referendum will go is the markets. The probability of a ‘Leave’ vote (“Brexit”) implied by the odds quoted by bookmakers has recently dropped below 30%. This is somewhat at odds with the signal from the opinion polls which, as shown, imply a generally closer race. In any case, Brexit risk is expected to become increasingly important for explaining GBP performance.”