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An investment exit on Brexit?

Although the possibility of Brexit looms above the financial community, the impact of such an event is unlikely to significantly alter the investment strategies of large British institutional investors as Central and Eastern European investment levels are low.

May 23, 2016 // 4:30PM

It is also unlikely that these investors would face increased taxes as a result of Brexit, as it would be in both the UK’s and EU’s economic interests to keep these down, analysts suggest.

With the question of Britain’s continuing membership in the EU edging closer, there are concerns over the impact on the country’s economy.

However, British institutional investors are unlikely to feel too significant an impact on their operations within the emerging market space, even in Central and Eastern Europe.

Although the UK’s investments in Central and Eastern Europe as small, they still outsize that of British investments in other emerging markets. “Within the emerging world, economic linkages with the UK are largest in Central and Eastern Europe, and even these ties are very small,” said William Jackson, Senior Emerging Market Economist at Capital Economics.

The relatively small number of investments from Britain within Eastern Europe means that a Brexit would unlikely significantly affect the investment strategies of large institutional investors.

Jackson added that it is hard to see a vote for Brexit having a major impact on aggregate investment flows to emerging markets outside of Europe. It is also unlikely that a vote to leave would have an impact on the taxes paid by institutional investors on their investments within the Central and Eastern European space, at least in the long term.

“It would seem likely that the UK would reach an agreement that preserved close economic ties and the free movement of capital; after all, it would be in the interests of both the UK and the rest of the EU. Accordingly, it seems unlikely that there would be additional taxes on investing in Eastern Europe,” Jackson stated.

Most UK banks have so far equivocated on the topic of a British exit from the EU, with some coming out in support of the ‘in’ camp.

“On balance we think it is in the interests of our customers and clients for the UK to remain in the EU. We have modest interests domestically on the continent, but provide significant services to European companies from London,” Barclays said in a statement. “More importantly, we are heavily reliant on a successful UK domestic and international economy and feel this is enhanced through the UK's membership.”

Europe Macro Policy & Government CEE & Turkey

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