The greatest risk facing the region is the U.K. referendum on its membership of the European Union, says the vice-chair of financial services firm Allianz Global Investors, reported CNBC.
Regardless of the outcome of the vote on June 23, it was a “very, very significant issue”, said Elizabeth Corley, the global CEO at Allianz Global Investors.
“If you think about the distraction value as a minimum for the whole of Europe of dealing with the referendum. You think of the consequences of the U.K., the economic consequences over which there is significantly less debate over some of the national identity issues,” she said on the outskirts of the Ambrosetti Workshop in Italy on Friday.
With assets under management worth 454 billion euros, Allianz Global Investors is owned by the German insurance giant Allianz. It would be fantastic if Britons voted to stay inside the European bloc, said Corley while she described herself as “very pro-Europe”.
“The EU is our largest trading partner, we have a huge trade surplus from services. Services are highly regulated and under any scenario they’ll remain regulated,” she said.
She estimated that the renegotiation of trade deals would take “at least five to 10” years and would distract policymakers from creating growth and added that a vote to leave would lead to an “annoying divorce” from the Union.
“There won’t be an amicable divorce,” she added.
There is a 33 percent chance that Britons will vote to leave the European bloc at the upcoming referendum according to current predictions by Bookmaker Ladbrokes. Major political heavyweights like Prime Minister David Cameron and London Mayor Boris Johnson have put forward opposing views on the issue as a fierce debate has strained relationships.
An “immediate and simultaneous economic and financial shock for the U.K.” would result from the so called Brexit, said analysts at Credit Suisse in January. A drop in business investment, hiring and confidence was also predicted by the credit rating agency. Leaving the EU could cost the British economy £100 billion ($142 billion) and 950,000 jobs by 2020, showed a new independent research released last week by the Confederation of British Industry.
Pressures on the U.K.’s state-run national health service, the threat of terrorism and the costs of EU membership are some of the major issues that those in favor of the “leave” campaign are propagating.
Another estimate made by Michael Browne, a fund manager at the London-based investment management firm Martin Currie says that a British exit from the European Union will slash between 2 percent and 5 percent off the country’s gross domestic product (GDP), reported CNBC.
The effects on the industry that were seen at the recessions of 1991 and 2008 would be visible is the so-called Brexit is adopted by UK. This would hit consumers and further weaken overseas investment in a country that has seen some promising growth since the last financial crash.
“It wouldn’t all happen overnight but that’s the sort of cost level you are looking at. You are looking at rising inflation, weaker sterling, would interest rates have to go up? Would you see a movement away, let’s say half a million people move out of the U.K., because they return home to get their jobs?,” he told CNBC.
(Adapted from cnbc.com)