One of Britain’s most influential fund managers has said a British withdrawal from the EU would have no long-term negative impact on the UK economy and could even benefit it in the short term.
Neil Woodford, whose £8bn fund has large stakes in leading British companies such as GlaxoSmithKline, BT and BAE Systems, said much of the debate over British exit was “bogus”.
Criticising both sides of the economic debate over Brexit, he said that claims that remaining in the EU was beneficial, or that pulling out was damaging, were both wrong. “It is really hard to see any credibility in an argument to stay or to leave constructed around economics. It’s a nil-sum game. If we stay or we leave, the fundamentals of the economy will be relatively unmoved.”
The fund manager, who in 2014 quit asset management group Invesco Perpetual to set up his own operation – and attracted billions from small investors – commissioned research on the potential impact of a British withdrawal from the EU which he has posted on his website.
The report, by consultancy Capital Economics, concluded: “It is plausible that Brexit could have a modest negative impact on growth and job creation. But it is slightly more plausible that the net impacts will be modestly positive.”
Woodford added that a British departure from the EU, and the economic uncertainty leading up to a referendum, was likely to push down the value of sterling, but that would help struggling exporters.
“It will be a significant event globally that may well be reflected in weakness of sterling, but that will be relatively temporary. If the currency is weaker for a period, that will be potentially stimulative for the economy, so it might actually work out to be good news for exporters.”
Woodford’s views puts him at odds with much of big business in the UK. Last week, HSBC warned that it could be forced to switch 1,000 banking jobs to France in the wake of a Brexit vote, while RBS chief Ross McEwan warned that the uncertainty caused by the upcoming referendum could “slow down banking”.
Leaders of most big banks argue that leaving would endanger both the status of the City of London as Europe’s financial centre, and growth prospects across the wider economy.
The CBI has come out strongly in favour of Britain remaining in the EU, publishing a glossy leaflet underlining the benefits of EU membership. EasyJet also warned recently that fares would rise if Britain left.
But Woodford is not alone among business and finance leaders, such as billionaire hedge fund operator Crispin Odey, and construction equipment company JCB boss Graeme Macdonald, in rejecting arguments that a UK withdrawal would seriously harm the economy.
In the report from Capital Economics published on the Woodford Funds website, the researchers argue that;
- on immigration “Policy is far more likely to change to restrict the number of low-skilled workers entering the country and shift towards attracting more highly skilled workers. This would be a potential headache for low-wage sectors heavily dependent on migrant labour, such as agriculture, but could benefit other sectors with a shortage of highly skilled labour.
- on trade “It is highly probable that a favourable trade agreement would be reached after Brexit … it is certainly possible that leaving the EU would leave the external sector better off in the long run, if Britain could use its newfound freedom to negotiate its own trading arrangements to good effect.
- on financial services “Financial services have more to lose immediately after a EU exit than most other sectors of the economy. Even in the best case, in which passporting rights were preserved, the United Kingdom would still lose influence over the single market’s rules.”
- on foreign investment “Concerns about a drying up of foreign direct investment if Britain votes to leave the European Union are somewhat overblown ... [but] we could see a period of weak foreign direct investment inflows as the United Kingdom’s new relationship is renegotiated.”
- on public finances “The British government could save about £10bn per year on its contributions to the EU’s budget if the country left the bloc. On the other hand, a little economic disruption and lower migration as a result of Brexit could offset these savings.
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