Moody's Warns Of 'Significant Impact' On Confidence Of A Brexit Vote

Moody's Warns Of 'Significant Impact' On Confidence Of A Brexit Vote

A Brexit vote would hit the entire European economy and have a "significant impact on confidence", according to credit agency Moody's in its latest warning over the EU referendum.

The group's quarterly report on the outlook for the global economy confirms that the June 23 vote is one of a number of "unique challenges" facing the European Union.

It said Brexit was the "most immediate concern" and renewed its warning that in the event of a vote to leave the EU, "prolonged uncertainty until alternative agreements emerge would be a cause for economic stress".

But it added the EU is also struggling amid the biggest influx of refugees in half a century, heightened security concerns, political impasse in Ireland and Spain and protests in France over proposed labour reforms.

It comes after a bleak report on the future of the EU earlier this month saw Moody's claim a Brexit could spark the collapse of the EU.

Moody's said at the time the EU faced "significant vulnerabilities", adding "the question is when the system breaks, not if".

The group's most recent report also gives a gloomy outlook for the world economy, forecasting growth to remain below pre-financial crisis levels for "some time", hit by emerging market woes.

It also trimmed growth forecasts for the UK over the next two years among a raft of modest downgrades for advanced economies, which it said are suffering after the oil price rout that left stock markets in turmoil at the start of the year.

The UK could see growth pull back sharply to as low as 1.5% from 2.2% in 2015, according to the forecast.

Moody's expects overall G20 advanced markets growth of 1.7% for 2016 and 1.9% for 2017, compared to 1.9% in 2015.

It added: "Resurfacing geopolitical and domestic political risks in a number of countries remain a risk. For example, the risk of Britain leaving the European Union could have a significant impact on confidence."

Moody's also predicts oil prices will remain low over the next two years, at an average of 33 US dollars a barrel in 2016 and 38 dollars in 2017.

The cost of crude went as low as 27 US dollars a barrel in January, which marked a plunge of more than 70% since the middle of 2014.

Vicky Pryce, economist and former joint head of the Government Economic Service, said: "Moody's have warned that the uncertainty caused by a leap in the dark out of Europe would damage our economy and make families worse off.

"Treasury analysis shows leaving would damage our economy to the tune of £4,300 a year for the average household. Staying in Europe will mean more jobs, lower prices and more financial security for British families.

"The OECD, IMF, IFS, and Bank of England have all highlighted the risks that leaving the EU could create.

"The likelihood is that prospects for the UK economy will worsen under any of the possible alternative scenarios and the economic case for staying in the EU is overwhelming."

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