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    UK: Neutral stance on the outcome of the EU referendum – RBC CM

    Research Team at RBC Capital Markets, adopts a neutral stance on the outcome of the EU referendum as the EU referendum opinion polls continue to come thick and fast.Key Quotes“As of the end of Tuesday the ‘poll of polls’ (average of the last six to be published), on the What UK Thinks website, had a narrow 51% v 49% lead for the Remain campaign, but with Leave having made up ground in the last few days.As the referendum gets closer (23 June) it isn’t surprising that more and more interest is being paid to developments in the polls but, although Leave have made up ground in the last few days, the long-term ranges are basically still intact. Since September 2015 the range of support for Remain on the ‘poll of polls’ measure has generally been between 50-56% and the range of support for Leave between 44-50%. Given the margin of error in opinion polls it seems fair to say that the campaign has been close all the way through as the tendency to hug a reasonably narrow range at or either side of 50/50. A clear breakout in the poll of polls from this established range would command market attention, but it is yet to happen.Sticking on the EU referendum theme but changing focus somewhat, we explored the extent to which the slowdown in UK growth is attributable to the uncertainty of the outcome, and prospects for a ‘Remain rebound’, if that were to be the outcome of the vote two weeks tomorrow.In our view, the EU referendum could have been responsible for reducing Q1 2016 GDP growth by ~0.1ppts, and a potential ~0.2ppts in Q2. That doesn’t explain all of the slowdown since 2015. In fact it is possible that the drop in the Markit/CIPS PMI surveys this year is only ~45% due to the referendum effect. Consequently, a rebound to a slower underlying growth rate of 0.5% q/q in H2 is expected to leave the MPC in cautious mode, even in the Remain scenario. February 2017 looks like the earliest chance to hike.”

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