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Brexit Will Endanger UK Financial Sector,BlackRock Inc Said

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March 2
4:36 AM 2016

BlackRock Inc, the largest asset management firm in the world warned that withdrawal from EU will damage financial sectors in United Kingdom. Higher unemployment and higher inflation is an apparent risk.

In June, United Kingdom will hold a referendum to vote whether Britain will stay in the European Union or leave, known as Brexit, an abbreviation of British Exit. The nations are divided into two faction, supporter of Brexit which gain a major support from mayor of London Boris Johnson and those who oppose Brexit, from business.

An American global investment management firm, BlackRock Inc on Tuesday warned the risk of Brexit. In report to clients, as quoted by Bloomberg, Vice Chairman Philipp Hildebrand said, "Brexit offers a lot of risk with little obvious reward."

Reuters quoted further comment from vice chairman Hildebrand, "We see an EU exit leading to lower UK growth and investment, and potentially higher unemployment and inflation. Any offsetting benefits look more amorphous and less certain, in our view."

UK will face a lower economic growth and drop in investment. BlackRock also mentioned the country will have to deal with higher unemployment and higher inflation, if it leaves the bloc.

In accordance with the vice chairman, Chief Macro Strategist for multi-asset strategies at BlackRock Rupert Harrison told Market Watch, "We couldn't rule out a situation where sterling falls and doesn't have a floor."

the worst-case scenario of Brexit is a severe currency crisis will hit United Kingdom that will force Bank of England to raise interest rate. Although that was not the most likely outcome of Brexit, but BlackRock predicted poundsterling will fall further with Brexit. June 23 referendum will trigger another drop in poundsterling before polling booths open.

Within this year, poundsterling has fallen more than 5% against both euro and dollar. While since last summer, sterling has already been down 12% against dollar as the uncertainty regarding Brexit continued.

Previously, London Mayor Boris Johnson and Justice Secretary Michael Gove has been known as a proponent of Brexit. While Prime Minister David Cameron had already pressed the importance of UK to stay in the European Union bloc. The nations are bitterly divided over the issue, while majority are still undecided, leaving plenty of room for anxiety.

BlackRock Inc is the world-largest asset management firm, managing more than $4.5 trillion assets. The firm was founded in 1988 as asset manager for institutional clients with risk management approach. BlackRock grew exponentially as its risk management approach provides better asset management, and U.S. government also hired the firm to manage aftermath of 2008 financial meltdown.

The renowned firm BlackRock Inc has warned that Brexit will damage the country's economy. As poundsterling will weaken and lead to higher inflation and higher unemployment.

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