The pound could crash by as much as 20% if Britain decides to leave the European Union, Goldman Sachs has warned.
Goldman is the latest in a growing array of big companies warning investors about the potential cost of a so-called ‘Brexit.’ The bank said leaving the EU would weigh on Britain’s economic outlook and make investors wary of investing in the country.
“An abrupt and total interruption to incoming capital flows in response to a ‘Brexit’ could see the [pound] decline by as much as 15-20%,” analysts at the bank said in a note to clients.
The pound has already weakened sharply since November when the issue of British membership in the EU came into focus, the bank said.
It has dropped nearly 6% against the dollar and 8% against the euro in the last 6 months. It’s now worth about $1.46.
The U.K. government has promised to hold a referendum on the EU question, and the vote could happen as early as June. It will be the first time in 40 years the issue has been put to the test, and the U.K. is deeply divided.
Many big companies view Britain’s membership in the union as crucial for their business in the country, and are lobbying to keep it inside the bloc.
Goldman Sachs itself has reportedly poured hundreds of thousands of pounds into the “stay in” campaign.
British Prime Minister David Cameron used a speech in Davos in January to urge big companies to campaign for the U.K. to stay in the European Union.