OREANDA-NEWS. Lengthy negotiations and uncertainty over UK firms' future access to EU markets following a vote to leave in the upcoming referendum on EU membership (Brexit) would weigh on confidence and delay investment decisions. This would have a short-term economic cost, although the precise impact would be highly uncertain, Fitch Ratings says.

Prime Minster David Cameron has announced that an In-Out referendum on the UK's membership of the European Union will be held on 23 June. Polls suggest a Remain vote is marginally more likely, and the Prime Minister's endorsement should boost the campaign. But a Leave vote that triggers the UK's withdrawal from the EU is a real possibility, although it is not our base case.

We believe that in the event of a Leave vote, the authorities on both sides would try to avoid disrupting the deep economic and financial integration between the UK and EU by establishing a clear new relationship, including a trade agreement that preserves UK attractiveness for investment. Some tightening of the freedom of EU citizens' to work in the UK would be likely. Avoiding large-scale, permanent disruption to trade relations, including services, could limit the long-term economic cost to the UK, with Brexit only moderately negative for the UK.

But there would be significant risks, especially if the remaining EU members attempted to impose punitive conditions on the UK to deter other countries from leaving, or the UK sought very tough restrictions on EU citizens coming to work in the UK.

We have published a report outlining our base-case expectations for Brexit, and how it might affect UK corporates, banks, insurers, and RMBS and covered bond transactions.