It's simple really — Yes or No. Photo: CNBC
Global markets are gearing up for a tense day of trading as the British public goes to the polls to vote on whether to remain in or leave the European Union with analysts pointing to "tough choices" for the UK, whatever the result.
Voting will take place between 7:00 a.m. and 10:00 p.m. London time – during which media reporting restrictions are in place – and after the votes have been counted and called in 382 local voting areas relating to 12 regions in the UK, an indication of the final result could emerge from 4:00 a.m. London time onwards.
European markets opened slightly higher on Thursday as voting got underway. Thursday is the culmination of four months of fraught campaigning by the leave and remain groups, who have been trying to win over the British public to their arguments over whether the UK would be better-off staying in the 28-country economic and political bloc or not.
The main points of division among the public are the costs of EU membership, the benefits of such membership to the economy, sovereignty and immigration with widely differing data used by campaigners on both sides.
Opinion polls have been close throughout the campaign and remain too close to call with a significant number of voters undecided up to the last-minute. Turnout is nevertheless expected to be high with around 46.5 million people eligible to vote, according to the Electoral Commission.
Markets were given a boost by the polls released on the eve of the vote by ComRes, conducted for the Daily Mail newspaper and ITV television, and YouGov for The Times newspaper in London, which showed a last-minute increase in the number of voters supporting the remain campaign.
The pound rose to a six-month high against the dollar following the polls, touching $1.4847. It was trading at $1.4793 at around 5.30 a.m. London time. It should be noted that two other polls, conducted by Opinium and TNS and also published on Wednesday, gave the leave vote a narrow lead.
Investors were more cautious in Asia, where stocks traded mixed on Thursday, following losses in US stocks and as markets remained on edge ahead of the UK vote. Several large banks have issued warnings over the possible ramifications of a Brexit vote with market volatility and a decline in sterling predicted should the majority of UK voters opt to leave the EU.
Asian markets were cautious overnight. Photo: iStock
Tough choices post vote
Whatever the outcome of the vote, analysts are pointing to difficult choices that still need to be made by the UK government and say that the future of Prime Minister David Cameron, who has led the remain campaign, remains in the balance.
If a Brexit result is announced, Cameron will at some time have to activate Article 50 of the 2009 Lisbon Treaty which sets in motion the process of leaving the EU which can take up to two years to complete. Once activated, there is seen as no easy way back for the UK (all other 27 EU nations would have to agree to allow the UK. to return).
Craig Erlam, senior market analysts at OANDA, said that the referendum was "arguably the biggest risk event of the year."
"With a number of polls suggesting the race is neck and neck, I would expect the markets to be quite volatile at times over the next 24 hours. Moves in the pound in particular could be quite wild once the voting closes this evening and the results start to be released from around 1am (UK) onwards," he said.
Most analysts retained their call for the UK to remain in the EU. Carsten Nickel, deputy director of research at Teneo Intelligence, said in a note on Wednesday that the risk advisory team retained its long-standing call unchanged: "The U.K. is marginally more likely to remain a member than to leave the EU (60/40%)."
Nickel noted that even if the UK votes to remain in the EU, "structural problems behind the populist surge are far from resolved" and said there was arguably no "positive outcome" from the vote.
"Any UK government would face tough choices post-Brexit: either fail to deliver on limiting immigration to secure full access to the single market, or risk limited trade-deals (which could take years to conclude) to regain full control over the UK's borders. In either case, a public backlash and continued populism are the risks," Nickel said.
"Even if the UK stays, structural problems behind the populist surge are far from resolved: Labour remains out of touch with middle-class voters; the majoritarian electoral system denies some 5 million UKIP voters representation; London appears ever more estranged – economically and culturally – from the rest of the country; inequality, immigration and the future of public services continue to cause concern among voters. The question of a regional devolution of powers, most notably to Scotland, add to these complications," he said.
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— Edited by Martin O'Rourke