The markets were so relaxed about Jeremy Corbyn winning the Labour leadership election that they appeared to greet the news with simply a collective shrug.
That contrasts with how energy stocks responded to Ed Miliband’s price freeze proposals in 2013 – because he was perceived to be in with a chance of becoming prime minister.
Mr Corbyn, by such a measure, appears to pose little risk. Any election is years away and a lot of water will flow under Westminster Bridge before investment advisers and their clients need to worry about wealth taxes.
All advisers will need a view about the impact of the EU referendum’s outcome on clientsOne slightly lazy view (to my mind) is that David Cameron will be able to negotiate significant concessions – perhaps a limited tightening of entitlements for EU migrants, more opt-outs from social legislation, and some very handy ‘carve outs’ for the City of London – and then recommend a ‘yes’ vote to the country with most of the political establishment backing him.
His intention to manage his restless backbenchers and see off the Ukip threat worked for the purposes of the previous election – but it has felt for some time as if the PM has been getting a bit of an easy ride.
Given the constitutional significance of any change in our relationship with the EU, the views of the left, whatever remains of the centre, and the three other home nations (all of which voted for parties other than the Conservatives), have felt strangely absent.
This takes us back to Mr Corbyn and indeed his union supporters. The former, with his indecision over EU membership; the latter, having said they are prepared to vote ‘no’ if the PM’s renegotiation ends up weakening employment rights. These views could sway a significant chunk of voters in a referendum.
Add in a refugee crisis, and the big rise in net migration this year from a still-underperforming European economy, and a ‘no’ vote might even become the most likely eventuality.
Talk to any global investment institution about this, and you are likely to hear them say a Brexit would represent a hugely significant strategic shift in terms of their asset allocations. That must surely have a bearing on how your clients’ money is invested.
Domestically, the impact varies sector by sector, as can be seen by divisions between different kinds of firms. Large export businesses with big exposure to Europe will definitely be in the ‘stay in’ camp. Meanwhile, some financial services sectors – hedge funds, for example – may want to be rid of EU regulation, something that their mostly US peers do not face.
While I doubt Mr Corbyn will ever see power, he could still prove very influential in debates about the future of the UK, and therefore to your clients’ investments.
John Lappin writes on industry issues at www.themoneydebate.co.uk
