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a Bloomberg Business flash. Your something to taking stock with Kathleen Hayes and Pim Box on Bloomberg Radio. The Bank of England, a rate decision, an upcoming vote on whether to remain part of the European Union, all issues that investors must taken to consideration and to get more perspective, we have Karen Mullhall. He is the chief investment officer at the Dublin based Global Reach Securities, joining us now.
Thank you very much for being with us. Begin by giving us your thoughts about the Bank of England being drawn into the debate about whether the United Kingdom should remain part of the European Union. Yes, good afternoon, Tim.
Football is well in New York. Yes, and we had to put an interesting Bank of England at meeting today where it looks like Mark Arney, the head of the Bank of England, has finally got dragged into the brit exit debase in Europe and they've been trying to sort of stay reasonably neutral and I think unfortunately with the modestly magnificant slowdown we've seen in the UK economy over the last six seven weeks, and he felt it was probably time to maybe highlight some of the downside risks
that would be associated with the UK voting to leave the European Union, and I particularly I suspect amongst the newspapers in at the UK tomorrow the mention of the r words recession was said for the first time, and he suggested that there would be some likelihood under certain situation you could see the UK economy for them to a recession later this year, if indeed they vote to
leave and in their referendum later in June. Is it your analysis that that's an accurate depiction of what would happen to the British And yeah, yeah, absolutely, I think that the I think that the we've we've seen that we've seen a fairly material slowdown just with the uncertainty of what would be associated with the referendum coming out US in a few weeks time. And I would suspect, you know that the likelihood is is that that the shock that such a decision to leave would have um
people would be, you know, somewhat nervous about investing. You know, the various trade deals et cetera that would have to be renegotiated, and you know, all would suggest a slower outlook for growth and and you know, it's not like the UK economy has been growing at sort of three or four or five percent over the last few years.
You know, in in a broadly low growth environment, any of those kind of shocks that would that that would any kind of shock that comes at you can easily tip you into the interfession, even if it's only a short lived one. How do you characterize the British economy right now? Give us the details if you can. Yeah, well, it had been one of the best of the o E c D countries and along with the United States
over the last two to three years. But we've seen the p m I numbers particularly as a kind of a leading indicator of growth and trend lower, the manufacturing number being contraction for the first time and for April, and I think that's again it's it's it's been very similar to the United States in the sense that employment has remained that the strong point consumer spending, it has
held up reasonably well. But the UK still runder rather large current account deficit which tends to be funded by mainland Europe and you know foreign fig multinationals, particularly with
capital coupital flows into the UK. And again the concerns around brig eggs at et cetera, you know, might bring in the question and the continuation of these flows, and I guess in that context currently mentioned today that that one of the one of what what he felt was one of the larger negatives associated with with a vote to leave would be that we would have a situation where Sterling would weaken quite materially, and given Sterling its
already weakened significantly in the last few weeks, um would excuse me over the last few two to three months, and that would be something I think to be avoided from from the Bank of England's point of view, Well, the Prime Minister of the UK, Prime Minister David Cameron, I mean he has worked through a renegotiation of Britain's relationship with the European Union, correct, I mean he did, yeah, And I think and and to be honest with you him, I like the book He's over here if you if
you're looking for odds on on the referendum, and the bookies are about seventy five percent, stay go. And I always tend to trust and the bookmakers before I trust the opinion posed. And I think that that the broader UK population of maybe appreciating a little bit more warned what Cameron was they able to achieve in terms of renegotiating the overall their overall relationship with Europe, but also as well maybe some of the downside risks associated with leaving.
And I think when I spoke with you in March, we talked a little bit about some Sterling strength, and we have noticed Sterling over the last particularly over the last three or four weeks, begin to trengthen a little bit now, particularly against the euro coming back from above
eight down towards the seventy seven seventy eight area. And at our base case, would would would remain that the likelihood is that it's going to be a stay, a vote to stay, and that you know, like the US, the the UK, if we can get past this, will probably re accelerate in the second half of the year.
And to be honest again Carney, Carney would have been highlighting that that that that that a vote to stay and and and no shock to the UK economy should lead to you know, back the trend growth at some point either later this year or in the first quarter of next year, which would probably have a situation with the with the Bank of England will probably move on interest rates and towards the first the end of the first quarter of next year, maybe into the second quarter,
with a vote, let's say to stay in the European Union on June the twenty three, at that national referendum in the United Kingdom. If the vote is to stay, will that change the carr of the current Conservative Tory government. Um No, where I don't think certainly often the short term and it would certainly it would and certainly strengthen Cameron's position as Prime Minister. And you know there would be certainly that think the's three or four prominent cabinet
members who are looking forward to leave. Um. I would what tends to happen in these situations is there have been a bit of time, will pass and assuming they do vote to say I would imagine Cameron Cameron will do some sort of cabinet reshuffle and that might We've got to leave it there. Karen Mohall, he is the Chief investment Officer at the Dublin based Global Reach Securities. On the United Kingdom and the referendum for the European Union coming up on taking stock, will be speaking with
David Novak. He is the founder of Oh Great One, but he also happens to be the co founder of Young Brands we've got details on his new book and recognizing employees