Interactive Investor

Amazing chart shows how referendums play out

17th June 2016 12:43

by Lee Wild from interactive investor

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We'll have the European Union (EU) referendum result this time next week. If the polls are right we'll be preparing for life on our own for the first time in 40 years. The big question then is: what next? Smooth transition or messy divorce? My money's on the latter.

According to the opinion polls, it'll be 'Leave' campaigners swinging from the chandeliers on the 24th. The latest Ipsos MORI poll for the Evening Standard newspaper puts 'Leave' on 53% and 'Remain' 47%. Others show either a smaller swing in favour of an exit, or reduced lead for 'Remain'.

Referendum hostilities are on hold following the tragic death of pro-Europe Yorkshire MP Jo Cox. It seems insensitive, but there's talk this terrible event could even have tipped the balance back in favour of the 'Remain' camp. We just don't know for sure.

And Deutsche Bank strategist Jim Reid suggested this morning that 'Leave' may need an even bigger lead in the polls to guarantee victory at the ballot box.

The thinking is based around previous referendums - in Quebec in 1995 and Scotland in September 2014 - and the current trend in the EU polls.

"As can be seen, the status quo of 'Remain' saw its lead progressively reduce in all three as referendum day approached," explains Reid. "The big difference in Scotland was that apart from two shock polls one and two weeks out, 'Remain' [in the UK] stayed comfortably in the lead in every other poll.

"In Quebec the lead and momentum for 'Leave' [independence from Canada] was similar to that seen recently in the UK with the exception of one even bigger lead for UK 'Leave' this past weekend."

In the last three to four days of polls before the Scotland vote, the average lead for 'Remain' was around 4%. The actual winning margin was 10.6%. In Quebec, the polls showed 5% in favour of 'Leave', but 'Remain eventually won by a 1.2% margin.

"Polls effectively showed a 6% final swing back towards 'Remain' or there was polling error," says Reid. "We'll never know which and we won't know until next week whether history repeats. Having said that, one can see why the 'Leave' lead might need to appear to be more than 5% for there to be high confidence that this will be the final result."

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

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