Cantillon: Brexit poses huge economic uncertainty

Will it be chaos? Or are we looking at a rerun of the much feared Y2K bug which, by January 2nd, 2000, had been largely forgotten as it did not amount to very much at all?

Economists and market analysts are united in forecasting market chaos if there is a Leave vote.

This will be all the greater because, in the last few days, the markets have persuaded themselves that Remain will win, and so have the bookies.

Sterling has firmed along with share prices and money has started to move back into slightly riskier assets.

The fallout, in the event of a Leave vote, does not bear thinking about, certainly initially.

And the problem then is that assessing the longer-term implications involves so many “ifs” and “buts” that how to trade in the event of a Brexit is far from clear.

Ironically, a Remain vote would mean, for the markets, a risk avoided, but would likely be forgotten about in a few days’ time.

It could well give a bit of a boost to sterling and equity markets – particularly in London. But much of this may already be priced in.

The rise in sterling and equities after a Remain will likely be nothing like as dramatic as the fall which would follow a Leave.

The risks, of course, go well beyond the financial markets and into the world of the real economy and people’s lives.

Economic opinion is pretty much united in predicting that a Leave vote would hit investment and growth in the UK. And in turn this would knock on to Ireland and the rest of Europe.

Reflecting how it might hit the markets, the negative economic impact of a Brexit would be much greater than any post-Brexit bounce.

British prime minister David Cameron has spoken of a surge of investment after the vote.

And Irish economists say that they suspect from some economic data that this has also knocked on to somewhat slower growth here in the second quarter. So there could be a kind of a “relief rally” in economic data in the event of a Remain – as investment decisions previously put on hold go ahead.

But it would be nothing like as dramatic as the risk to growth which a Brexit would pose, and the huge uncertainty it would put on the economic landscape for a long time to come.