Currency traders believe the pound will fall to record lows against the euro of 1.05 to 1.25, compared with just under 1.27 euros last Friday, nearing parity or the first time since the single currency’s 1999 launch.
The City also believes share prices could fall between 5 and 10 per cent initially after any Brexit vote as the market takes fright from any damage to British business.
One City trader said: “There is bound to be a big psychological impact on both the forex and equities markets if it is a vote to leave.
“A fall in the FTSE 100 of 500 points initially would not be a surprise. Sterling would also take a hit, but there the waters are more muddied as Britain leaving would be a negative for the Europeans so the euro could be impacted as well.”
Paul Mumford, senior investment manager at Cavendish Asset Management, said: “Financial markets have been talked down already because of scary Brexit stories.
“Psychologically there will be an immediate impact if the vote is to quit the EU. But it is quite possible the initial depressed reaction won’t be the same as the markets’ view in a few months time.”
Meanwhile, Paul Drechsler, president of the CBI, 80 per cent of whose members support Remain, said business people supporting Leave should be able to handle so-called scare stories about the potentially destructive economic impact of Brexit.
Drechsler, who was in Edinburgh on Friday for the CBI Scotland annual lunch, told The Scotsman that he expects people who run companies to be “courageous”.
He said: “If they can’t deal with the pressure they shouldn’t be doing the job.” Firms needed to consider the impact of leaving on their organisation, their customers, and the broader communities they serve, and should encourage their employees to vote, Drechsler believes.
“If you care about the outcome, do something about it,” he said. “If it’s right for your business to leave, vote leave. I have no issue with that. But I do have an issue with silence.”
The CBI chief, who is also chairman of international firm Bibby Line Group, added that the “vast majority of people in business think it’s better for their business, better for Britain and better for Scotland to remain in”.
Looking at the “economic shock and consequence” of Brexit, he said, “I don’t think we have any idea how bad that might be”.
He said that might be labelled as “scaremongering”, but when Lehman Brothers failed in 2008, people asked what happens when one major bank fails. “Well, we let one bank fail and what happens? The world was brought to its knees.”