As I have previously warned a vote for Brexit on June 23 would be a disaster for the UK economy LINK1. Now the Treasury has published a report outlining how bad the potential disaster will be LINK2. I would take the report very seriously and actually I am more pessimistic than the Treasury worst case scenario. I believe the expectational effects would be much worse due to the massive increase in uncertainty which I believe is worse than modelled by the Treasury. I think the report does a pretty good job overall in showing that the effects of a Brexit are multi-dimensional hitting GDP, economic growth, employment, wages, raising inflation, fiscal impact, raising interest rates, lowering investment and FDI. Anyhow below is a nice summary table showing two possible scenarios: Scenario 1 "a shock" and Scenario 2 "a severe shock". I am confident that people will ultimately not be willingly vote themselves out of a job but there is no point in beating about the bush here. A vote for Brexit will have severe adverse short term and long term economic consequences. Trade deals take ages to negotiate (the Doha round has been ongoing for 15 years with no resolution) and the UK will find negotiating such deals extremely difficult.

One of the adverse effects of extraordinary low interest rates and quantitative easing policies is that it has enabled a lot of zombie companies to stay in business. While this has kept open many companies that should have gone under it has also meant a lot of excess capacity. Keeping the zombies alive hits even the healthy companies. This is certainly not healthy for the long run health of an economy. The good news is that the zombie companies are finally getting culled as the number of corporate defaults has been increasing rapid during 2016. A bad company tends to remain a bad company far more often than not, as interest rates rise then even more zombies will go out of business. The following graphic illustrates the rise in corporate defaults especially in the US. A lot of the companies are concentrated in the energy and commodity space where the price falls in the last couple of years have been signif9icant. There are of course plenty of zombies operating in China so I expect a rise in corporate defaults in emerging markets to increase significantly during the next year or two as global interest rates rise.

As an Arsenal supporter I am of course not happy with the fact we failed to win the premier league this season - no excuses this year, the team was good enough to win but underperformed. However, there was a bit of good news as the Chelsea draw with Tottenham last night meant that Leicester are crowned champions and just as importantly Tottenham cannot win the title and as a gooner that gives me a great source of satisfaction. For many years it has been Tottenham's delight to have taken points off Arsenal that have maybe prevented us winning the title or letting Man Utd win so as to scupper Arsenal chances. So I take great delight in the fact we have taken points off Tottenham that have helped prevent them winning the title. Also Leicester winning the premiership is proof that hard work and excellent team morale can triumph over pure financial muscle...Chelsea sacked Ranieri as manager many years ago saying he would never win the premier league, the Chelsea players will now form a guard of honour for Leicester in the last game of the season.