Sterling could drop 30% in Brexit, warns former BoE economist

Pound-Sterling-GBP-Money-Currency-Andrew-Michaels-700x450.jpgSterling could lose 15 to 30 per cent of its value within two years if the UK decides to leave the European Union, warns James Ashley, head of international market strategy at Goldman Sachs Asset Management.

Speaking at a Defaqto conference, the former Bank of England economist says: “Brexit will not be an event, it will be a multi-year process. In that process it will be a very difficult environment for sterling assets.

“In the initial stages, up to two years from Brexit if it happens, the currency could go down by 15 to 30 per cent.”

Last week sterling fell to a 7-year low after David Cameron announced the EU referendum date as June 23 and Boris Johnson backed the ‘Out’ campaign.

However, the longer-term prospects for the UK after Brexit look more promising, says Ashley.

He says 10-years after Brexit the UK can become a leading offshore centre and likens its position to the “Singapore of Europe”, becoming “more vibrant and dynamic” as it would cut itself off from the “overly protective Brussels”.

He says: “From a pure macro perspective you might say we might be better off [out of the European Union] in the long term but in the short term, if you are to build a factory in Manchester, for example, you might be more inclined to do it elsewhere because of the uncertainty of access to labour and capital.

“So in the transition period, I find it very difficult to see how we would have anything other than a difficult and adverse environment for sterling.”