Technical briefing - The referendum on European Union membership
How can trustees prepare for the Brexit referendum?
Prime minister David Cameron has made a commitment to holding a referendum on the UK’s continued membership of the European Union by 2017. However, many political pundits are predicting that he could decide to hold it this June if he achieves a successful renegotiation of the UK’s membership terms at February’s European summit.
In December Cameron said that 2016 would be “the year” in which the UK’s long-term relationship with the EU was determined, suggesting that he would prefer to go ahead with the referendum before 2017 if possible.
What does this mean?
Either way, the referendum is set to dominate headlines, especially as new campaign groups both for and against begin to draw battle lines.
Trustees should speak to their investment managers to make sure they have a plan to deal with market volatility in the run-up to the referendum and possible market shocks if the ‘out’ vote wins.
Law firm Gowling WLG suggests that trustees may also want to consider currency hedging and exposure to non-Sterling-denominated investments to protect themselves.
What will happen next?
Trustees should follow the EU summit in February carefully and keep abreast of when the vote is likely to take place. If the date is set for June, schemes should hold meetings with their advisers to discuss plan risks and what the next steps might be, particularly if it looks possible that the UK will decide to leave the EU.