UK referendum likely to be held on 23 June, Morgan Stanley says

There is a relatively high chance that European Union heads of state can reach an agreement in time to call the UK referendum on continued EU membership by June, Morgan Stanley said on Friday, with good odds that that David Cameron's campaign for the "stay" vote will triumph.

A deal at the 18-19 February EU council meeting is felt to be likely, as EU leaders have already sounded a positive note on the draft proposals from EU council president Donald Tusk, allied to Cameron's endorsement and the fact that no major UK cabinet figure had signalled their opposition.

In a research note sent to clients, Morgan Stanley assigned a probability of about 70% to such an outcome.

Parliament will need 16 weeks' prior notification of the vote's date. Hence, for the referendum to be held before the start of the school summer holidays made the 3 March the latest date by which a deal could be agreed and regulations laid in parliament to hold it in the summer.

Morgan Stanley estimated 23 June as the most likely date for the referendum, as Downing Street is already rumoured to have done, as it would be the last Thursday before the Scottish summer holiday.

As regards the outcome of the vote, the bank put the chances of a "stay" vote to remain inside the reformed EU at 65% and that of Brexit at 35%.

"In particular, we think that PM Cameron campaigning for Remain on the basis of reformed terms of membership could tip the balance to Remain. However, it remains a close call: we note that polls suggest "Leave" may have actually edged ahead since the draft deal was announced.

"We think that the political and economic uncertainty from a vote to Leave would be a negative shock for investment,confidence and growth, keep policy on hold, or even easing, and hit risky assets."