CREDIT SUISSE: The Brexit chaos is already here

Photo: Getty Images / File

Credit Suisse has an unusual “Breaking News: Brexit Watch” note out to clients.

Analysts Sonali Punhani, who is VP for European Economics, and her colleague Peter Foley from the European Economics group have a snap summary of the increasingly frenetic campaign developments:

Chancellor George Osborne claimed Brexit could open a £30bn hole in the UK’s public finances. He ramped up warnings that the Treasury would be forced to fill the gap though higher income tax, alcohol and petrol duties; and by cutting funding to the NHS, schools and defence. He claimed this could mean a 2p rise in the basic rate of income tax to 22%, a 3p rise in the higher rate to 43%, and a 5% rise in inheritance tax to 45p. However, 57 Tory MPs signed a statement that said they would vote against George Osborne’s proposed post-Brexit emergency budget.

They share the following powerful chart showing the apparent tipping point in momentum for the Leave campaign.

Source: Credit Suisse

As if the point needed to be reiterated, they also shared this chart showing the Remain campaign’s lead falling into negative territory.

Source: Credit Suisse

Almost like a German 10-year bond.

As a final note, perhaps somewhat ominously, they include this chart of the FTSE without comment, which shows it might be doing what traders would call “topping out”, or being on the verge of a steep fall.

Source: Credit Suisse

Punhani has warned before of the immediate consequences of a vote in favour of Leave. She wrote in January:

Overall, the vote to leave the EU would entail an immediate and simultaneous economic and financial shock for the UK. We are likely to see an immediate contraction in GDP, which can be seen as a front-loading of the fall in UK national income that leaving the EU would imply for the UK.

In the medium term, we expect it to be negative for both UK demand and supply implying a weaker GDP growth path. The recovery from the snap recession is likely to be more muted, making the GDP level post leaving meaningfully lower than if the UK votes to stay.

There’s just over a week to go.

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