He adds that although we are currently under a cloud of uncertainty over the referendum, hopefully that will be resolved in June. “I think if it is resolved positively for remaining in the EU, that could bounce back business confidence and financial confidence, and the position of the pound,” Mr Sentance says.
The current government has received a lot of criticism for its failure to meet targets. The recent resignation of Mr Duncan Smith has also highlighted the ongoing rift among members in the Conservative party. In his attack on his own government, Mr Duncan Smith said that the Tory party is hitting the poorest in order to meet deficit targets. He stated that he was unable to accept the government’s planned cuts to disability benefits, despite previously being the public face of the policy.
However, Mr Duncan Smith’s resignation was immediately criticised by pensions minister Ros Altmann, further exposing the rifts in the party. Accusing Mr Duncan Smith of being motivated by a desire to do maximum damage to the party, Ms Altmann suggested the resignation was over the EU referendum campaign rather than a protest about disability benefits cut.
On June 23, the UK will vote to stay in or leave the EU. While the Tories are divided in their views on the EU referendum debate, Prime Minister David Cameron has been supporting the campaign for the UK to stay in the EU. As many as 150 Tory MPs are believed to be backing Brexit, meaning that the parliamentary party of 331 MPs is split almost in half.
In a recent poll conducted by YouGov, 40 per cent of the electorate wanted to remain in the UK, 37 per cent wanted to leave and the remaining 23 per cent did not know or would not vote. The poll conducted in March also highlights that people often decide how to vote much later in referendums than in general elections, and referendum polling is often far more volatile than general election polling.
The YouGov posed several questions, the results of which are shown in Charts 2 and 3. On the topic of whether Britain would be economically better off or worse off if it left the EU, 31 per cent said it would be worse off, while only 23 per cent believed it would be better off.
The uncertainty has had an impact on both the economy and politics. Economically, the risk of uncertainty along with the slowdown of the global economy has hit the pound, making it weaker than it was last year.
“We think this is going to continue until the June 23 referendum,” says Mr Stubbs. “I think there will be significant volatility in sterling and that will probably feed over into some of the credit markets as well. Then who knows what happens after that referendum?”