UK

Credit ratings agency says Brexit will impact on entire EU

Credit ratings agency Moodys says protests in France over proposed labour reforms are one of a series of "unique challenges" facing the European Union
Credit ratings agency Moodys says protests in France over proposed labour reforms are one of a series of "unique challenges" facing the European Union Credit ratings agency Moodys says protests in France over proposed labour reforms are one of a series of "unique challenges" facing the European Union

A BREXIT vote would hit the entire European economy and have a "significant impact on confidence", according to credit agency Moody's in its latest warning over the EU referendum.

The group's quarterly report on the outlook for the global economy confirms that the June 23 vote is one of a number of "unique challenges" facing the European Union.

It said Brexit was the "most immediate concern" and renewed its warning that in the event of a vote to leave the EU, "prolonged uncertainty until alternative agreements emerge would be a cause for economic stress".

But it added the EU is also struggling amid the biggest influx of refugees in half a century, heightened security concerns, political impasse in the Republic and Spain following general elections and protests in France over proposed labour reforms.

It comes after a bleak report on the future of the EU earlier this month saw Moody's claim a Brexit could spark the collapse of the EU.

Moody's said at the time the EU faced "significant vulnerabilities", adding "the question is when the system breaks, not if".

The group's most recent report also gives a gloomy outlook for the world economy, forecasting growth to remain below pre-financial crisis levels for "some time", hit by emerging market woes.

It also trimmed growth forecasts for the UK over the next two years among a raft of modest downgrades for advanced economies, which it said are suffering after the oil price rout that left stock markets in turmoil at the start of the year.

The UK could see growth pull back sharply to as low as 1.5 per cent from 2.2 per cent in 2015, according to the forecast.

Moody's expects overall G20 advanced markets growth of 1.7 per cent for 2016 and 1.9 per cent for 2017, compared to 1.9per cent in 2015.

It added: "Resurfacing geopolitical and domestic political risks in a number of countries remain a risk. For example, the risk of Britain leaving the European Union could have a significant impact on confidence."

Moody's also predicts oil prices will remain low over the next two years, at an average of $33 US a barrel in 2016 and $38 in 2017.

The cost of crude went as low as 27 US dollars a barrel in January, which marked a plunge of more than 70% since the middle of 2014.