No deal Brexit could trigger 25% fall in UK stocks

A “no deal” Brexit could lead to a fall in UK equities of 23% and a 10% fall in European equities, according to analysis by index and investment data provider MSCI.

MSCI came up with the findings following stress-testing using its risk management tool. It commented: “The UK has underperformed other regions in terms of GDP growth, as well as in the equity and currency markets. However, the real impact – if there is ‘no deal’ – has yet to materialise. Various scenarios we tested suggest a significant slowdown in the UK economy and large losses in its equity markets and exchange rate.”

MSCI said that following the EU referendum in 2016, sterling has lost 7% against a basket of currencies, while UK shares have lagged global equity markets significantly. “The drop in the pound and underperformance of the UK equity market suggests that markets have already partially priced in a Brexit,” MSCI said.