The referendum vote for a Brexit is a mere 5 weeks away and campaigning on both sides has already begun in earnest. Prime Minister David Cameron, opposition Labor Party leader Jeremy Corbyn and other major politicians were out on the road Saturday pushing their ‘Britain Stronger in Europe’ mantra while Grassroots Out, one of the groups campaigning for a Brexit, has organized street stalls and has been dropping leaflets across the country over the weekend.
Polls are forecasting that the June 23 referendum will come in close to a tie and both campaigns are intensifying their activity and rhetoric. Last week Cameron came out with a statement that war is more likely if Britain leaves the EU and on Friday the International Monetary Fund endorsed Bank of England Governor Mark Carney’s verdict that a British exit from the EU could trigger a recession in the country.
According to Cameron, "If we vote to leave on the 23rd of June, we will be voting for higher prices; we will be voting for fewer jobs; we will be voting for lower growth; we will be voting potentially for a recession." he said. He pointed to Treasury data that estimated that an EU exit would cost British families more than 4300 BPS ($6,000) each.
Pressure on the GBP
The impending possibility of a Brexit has put pressure on the sterling with options traders more bearish then they have been since 2003 for the period covering the June 23 referendum.
The pound declined 0.4 percent this week to $1.4372 as of 5 p.m. London time on Friday, after dropping 1.3 percent in the five days through May 6. The currency strengthened for the first time in three weeks versus the euro, gaining 0.6 percent to 78.60 pence.
Inflation data due out due May 17 may lend support to the Bank of England maintaining record-low interest rates, as consumer-price growth may well remain below the central bank’s 2 percent target. The U.K. will also release reports on employment, housing and retail sales this week which are expected to be down, prompting some investors to speculate that the BOE will reduce interest rates rather than raise them.
BOE policy makers led by Governor Mark Carney said last week that the effects of the referendum may account for about half of the 9 percent fall in the pound’s trade-weighted rate in the past six months. He warned that the U.K. economy could slip into recession should Britain vote to leave the EU.
An average of the last six public opinion polls show Britons to be split on the issue of whether to leave or remain in the 28-nation political and economic EU bloc. Campaigners on both sides are reaching out to ex-pats living abroad and reminding them that they are entitled to vote on the issue.
Immigration Key Issue
A key issue for both sides is immigration. Those who favor a Brexit accuse the EU of allowing thousands of immigrants to enter the country (or have already taken up residency there) which they see as a major detriment to the economy, taking up jobs needed for British citizens and bringing in influences not particularly welcome in the country.
Those in favor of remaining a member of the European bloc believe that new immigration is a positive factor in local as well as international economic growth and believe that an open-door policy is what is needed to stimulate the economy.
The next round in the battle over European immigration will take place next week when new numbers for foreign workers in Britain will be released and again on 26 May, when the last set of quarterly migration figures are published before the referendum.