Arguments in favour of Britain either staying in or leaving the European Union (EU) that are based on economics have no merit, with the debate solely about politics, says Neil Woodford, manager of the £8.2 billion Woodford Equity Income fund.
Reiterating the findings of a report that he commissioned from Capital Economics, Woodford says that the economic factors of the Brexit debate are in fine balance, with the drawbacks of leaving the EU largely balanced out by the benefits and vice versa.
For example, while the £19.8 billion exported by the UK's financial services sector to Europe every year may come under threat in the short term due to the loss of passporting rights, Capital Economics claims that the City's competitive advantage is not solely down to the single market access and leaving could open up a long-term opportunity.
ECONOMICS-BASED ARGUMENTS HAVE 'NO MERIT'
On foreign investment from the EU, which accounted for 46 per cent of the UK's stock of inward investment in 2013, the firm says that Britain is likely to remain a safe haven for foreign investment in the longer term, and that losses incurred by weaker investment in the short term could be recouped.
Moreover, while the value of sterling is likely to fall in the short term, both Capital Economics and Woodford claim that this could provide a boost for the UK's beleaguered manufacturing and exporting sector.
'There is no economic case either for the UK to stay in or to leave the EU,' says Woodford. 'Ultimately the debate will come down to politics - it's about sovereignty, political allegiances, ideology and immigration and it will be interesting to watch - but any argument based on economics has no merit.'
The manager adds that business leaders who argue otherwise, such as the bloc of FTSE 100 chiefs who submitted an open letter to The Times on Tuesday (23 February) are 'wrong'. Ultimately, Woodford says that the issue is far more important for the EU than it is for Britain.
'If we leave the EU the impact on the UK stock market will be short-lived and sterling weakness may be beneficial. The truth is that this is a much bigger deal for the EU than it is for us.
'The European banking system is very sick and Italy and France are now approaching dangerous levels of debt relative to GDP. A breakdown of the EU project could be disastrous for them.'
On how stock market volatility - however shortlived - might affect his portfolio, Woodford says that he does not expect any problems. In fact, he says that sterling weakness would be largely positive for his fund, as it is more sensitive to movements in the US dollar, which would strengthen.