Remain or leave?
Despite the majority of polls showing both camps as neck and neck, it seems that most observers believe the outcome isn’t as finely balanced as the surveys suggest, with recent odds from bookmaker Betfair showing a 76% ‘implied’ probability of a Remain scenario.
Earlier this week the pound traded at its highest level of 2016 against the US dollar, whilst the FTSE 100 has gained over 300 points or approximately 5% in the last five trading sessions. Given the conventional wisdom that a victory for Leave would weigh heavily on both these markets, this suggests that little discount is currently priced in for a Remain.
A quarterly survey of 120 chief financial officers and group finance directors of major companies in the UK by Deloitte shows a surprising lack of contingency planning in the event of a Brexit. The CFOs questioned are responsible for the financial strength of approximately 17% of the UK and their responses offer a fairly respectable level of insight into the wider views within the country. More than half of the respondents explicitly stated that they had made no plans in the event of the UK terminating its existing EU membership, which is alarming considering the potential impact to nearly all sectors - something that has been widely acknowledged throughout the campaigns and debates.
Whilst it is an unenviable task that borders on the impossible to accurately predict the new trading conditions within an industry in a post-Brexit Britain, the absence of any tangible contingency plans seems hopeful at best and negligent at worst. Hope may go some way to explaining this laissez-faire attitude with 75% of the CFOs surveyed in favour of the UK remaining in the EU, but the borderline dismissive attitude that is also reflected in current market prices for sterling and UK equities has done nothing to dampen the potential scale of a shock if the Leave campaign finds itself victorious.
A separate research report conducted by the Chartered Institute of Internal Auditors (CIIA) found that 77% stated that they rated Brexit as a more significant risk now than six months ago and had discussed the implications of a possible Brexit at executive board level. Despite 39 heads of internal audit at FTSE 250 companies being asked on their levels of preparation for a possible UK exit from the EU, only 10 had formally discussed contingency planning for such an outcome with the chairman of the audit committee or the board chairman.