Ask the bankers…

At the end of January 2016 Bank of England governor Mark Carney stated during an appearance before MPs of the Treasury Select Committee that a British vote to leave the European Union would add a “risk premium” to Britain in an “increasingly febrile” global economy. He justified his answer based on Britain's current account deficit. He explained his position as follows:

"First, the general global environment has become much more febrile, much more volatile. Relying on the kindness of strangers is not optimal in that type of environment, and that’s what is the case when you’re running a 4-4.5 per cent current account deficit. And secondly, the possibility of a risk premium being attached to UK assets because of certain developments exists. And that plays into the riskiness of the situation."

Based on these comments as well as other factors, leading investment bankers Goldman Sachs warned shortly thereafter, in February 2016, that the pound could lose one-fifth of its value in if UK voted to leave the European Union. According to them the British pound could fall sharply crashing to as low as $1.15 US or $1.20 US. George Cole, a Goldman Sachs economist, stated that leaving the EU would “increase uncertainty, weigh on the UK outlook and raise concerns of foreign investors”, resulting in “an abrupt and total interruption to incoming capital flows”. Bank of England Governor Carney confirmed these fears at the beginning of March 2016, when he again appeared before the Commons Treasury Select Committee and stated that Brexit is the "biggest domestic risk to financial stability".