If the United Kingdom votes to leave the EU on June 23, it will lead to a global shock that could spark significant volatility across risk assets.
The pro-Brexit rhetoric has argued that an exit from the EU would allow the UK to regain autonomy and focus on its own local troubles; these include immigration and security policies that could help to save millions of pounds. It could even lead to a short-term market sell-off, which could be a good buying opportunity for others. Negative impacts on the mutual funds sector could be short term, too.
However, opponents of a Brexit argue that membership benefits of the EU and access to the common market outweigh many of the problems that come with membership.
The UK is the largest financial centre in the European Union and every day The City of London attracts a wide range of global banks and investors across asset classes and strategies. Therefore Brexit would lead to a lasting impact not just on the UK but on other EU members. Several key regulatory and legal issues would need to be considered for a firm to assess their potential impact – for example, on banking firms that use the “passport system” to access other EU countries. If the system lapses, as a result of Brexit, entire business models and operational structures may have to be changed.
The Leave rhetoric continues to state that EU membership is now a threat to London’s affluence. The idea that London would flourish post-Brexit goes against the many warnings from US investment banks and the Bank of England itself, among others. Many financial establishments have warned that Brexit would drain London of its wealth, topple the pound, undermine the world’s fifth-largest economy and push traders to move their businesses to alternative global financial centres. However, for international investors, the decline in the pound would benefit countries translating earnings from overseas back into the pound as exports, goods and services would be cheaper.
Membership of the EU provides British businesses their much-needed access to the European single market. Brexit could potentially increase UK-EU trade costs as well as exclude the UK from any deeper integration (such as the planned Transatlantic Trade and Investment Partnership with the United States). This could spur a plunge in business and consumer confidence and the UK’s financial sector could suffer greatly.
London has long been a popular investment destination but half of those investments into the UK come from the EU. Still, a significant chunk of investment also trickles down from China, the US and the Middle East.
Middle East investors have continued to buy property in the UK despite fears about its future in the EU, albeit it at a lower rate. The majority of the Middle East property investors would prefer the UK to remain in the EU and many have also said a decision to leave would negatively impact their investment strategies.
As most Middle East currencies are pegged to the US dollar, a weakening euro and pound has shaped beneficial investment opportunities for investors. In addition, slowing growth figures in the UAE, with GDP foreseen at 2.6 per cent this year, from 3.2 per cent in 2015 and 4.2 per cent in 2014, and a budget deficit expected to hit 7.5 per cent in 2016, means wealthy individuals will be encouraged to look overseas for investment opportunities.
Brexit has the potential to impact the Middle East’s real estate, travel and banking sectors, among others. Investors are taking a cautious approach to the UK until after the vote and no doubt will continue to be wary in the months following. A Brexit would weaken London’s role as an international financial centre as it would lose its current ability to access European markets.
Therefore Brexit could also be damaging to the UK’s international investments and it could lose credibility globally.
Mihir Kapadia is the chief executive of Sun Global Investments in London.
business@thenational.ae
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Off-roading in the UAE: How to checklist
Sukuk explained
Sukuk are Sharia-compliant financial certificates issued by governments, corporates and other entities. While as an asset class they resemble conventional bonds, there are some significant differences. As interest is prohibited under Sharia, sukuk must contain an underlying transaction, for example a leaseback agreement, and the income that is paid to investors is generated by the underlying asset. Investors must also be prepared to share in both the profits and losses of an enterprise. Nevertheless, sukuk are similar to conventional bonds in that they provide regular payments, and are considered less risky than equities. Most investors would not buy sukuk directly due to high minimum subscriptions, but invest via funds.
Cheeseburger%20ingredients
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UPI facts
More than 2.2 million Indian tourists arrived in UAE in 2023
More than 3.5 million Indians reside in UAE
Indian tourists can make purchases in UAE using rupee accounts in India through QR-code-based UPI real-time payment systems
Indian residents in UAE can use their non-resident NRO and NRE accounts held in Indian banks linked to a UAE mobile number for UPI transactions
The specs
Engine: 2-litre or 3-litre 4Motion all-wheel-drive Power: 250Nm (2-litre); 340 (3-litre) Torque: 450Nm Transmission: 8-speed automatic Starting price: From Dh212,000 On sale: Now
How Islam's view of posthumous transplant surgery changed
Transplants from the deceased have been carried out in hospitals across the globe for decades, but in some countries in the Middle East, including the UAE, the practise was banned until relatively recently.
Opinion has been divided as to whether organ donations from a deceased person is permissible in Islam.
The body is viewed as sacred, during and after death, thus prohibiting cremation and tattoos.
One school of thought viewed the removal of organs after death as equally impermissible.
That view has largely changed, and among scholars and indeed many in society, to be seen as permissible to save another life.
RACECARD
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England squads for Test and T20 series against New Zealand
Test squad: Joe Root (capt), Jofra Archer, Stuart Broad, Rory Burns, Jos Buttler, Zak Crawley, Sam Curran, Joe Denly, Jack Leach, Saqib Mahmood, Matthew Parkinson, Ollie Pope, Dominic Sibley, Ben Stokes, Chris Woakes
T20 squad: Eoin Morgan (capt), Jonny Bairstow, Tom Banton, Sam Billings, Pat Brown, Sam Curran, Tom Curran, Joe Denly, Lewis Gregory, Chris Jordan, Saqib Mahmood, Dawid Malan, Matt Parkinson, Adil Rashid, James Vince
Also on December 7 to 9, the third edition of the Gulf Car Festival (www.gulfcarfestival.com) will take over Dubai Festival City Mall, a new venue for the event. Last year's festival brought together about 900 cars worth more than Dh300 million from across the Emirates and wider Gulf region – and that first figure is set to swell by several hundred this time around, with between 1,000 and 1,200 cars expected. The first day is themed around American muscle; the second centres on supercars, exotics, European cars and classics; and the final day will major in JDM (Japanese domestic market) cars, tuned vehicles and trucks. Individuals and car clubs can register their vehicles, although the festival isn’t all static displays, with stunt drifting, a rev battle, car pulls and a burnout competition.
Manchester United v Club America
When: Thursday, 9pm Arizona time (Friday UAE, 8am)
Origin
Dan Brown
Doubleday
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BORDERLANDS
Starring: Cate Blanchett, Kevin Hart, Jamie Lee Curtis
Director: Eli Roth
Rating: 0/5
KINGDOM%20OF%20THE%20PLANET%20OF%20THE%20APES
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The specs
Engine: 1.5-litre 4-cylinder petrol
Power: 154bhp
Torque: 250Nm
Transmission: 7-speed automatic with 8-speed sports option
Price: From Dh79,600
On sale: Now
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TRAP
Starring: Josh Hartnett, Saleka Shyamalan, Ariel Donaghue
Director: M Night Shyamalan
Rating: 3/5
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A%20Round%20of%20Applause%20
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