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Brexit could wipe £450 billion off UK equities, research warns

Published 09/06/2016

UK assets could face a
UK assets could face a "torrid period" if Britain heads for the EU exit door, according to Absolute Strategy Research

Pensioners could suffer from £450 billion being wiped off UK equities if Britain votes to leave the European Union, according to research.

UK assets could face a "torrid period" if Britain heads for the EU exit door, with foreign investors also taking a hit from a plunge in the value of sterling, according to Absolute Strategy Research.

It found that a Brexit vote would see the risk premium demanded by investors on UK equities rise by 100 basis points, indicating a 20% drawdown on UK equity prices.

Analyst Ian Harnett, of Absolute Strategy Research, said: "A 20% fall in UK equities could wipe £450 billion off the UK market. That would be a big hit for UK pensioners.

"If sterling breaks 1.38 US dollars then there is little technical support before parity - that implies a 28% fall."

But analyst David Bowers said the market had yet to price in the "high degree" of policy uncertainty following a Brexit vote.

He added: "The UK's equity risk premium is lower than you might expect for current levels of policy uncertainty."

Credit ratings agency Standard and Poor's warned last month that sterling risks being ''considerably'' weakened in the event of Brexit and could lose its status as a reserve currency.

The S&P report warned that the loss of reserve currency status could push up the cost of Government borrowing and threaten the UK's AAA credit rating.

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