Ten of the world’s leading economists have issued a warning about the consequences of the UK leaving the EU as the City prepares for the pound to plunge and shares to fall in the event of a Brexit vote in Thursday’s referendum.

In a last-ditch attempt to persuade voters, 10 Nobel-prize winning economists, who have all been made professor laureates for research stretching from the early 1970s up until last year, have written to the Guardian to say the economic arguments are key.



“Brexit would create major uncertainty about Britain’s alternative future trading arrangements, both with the rest of Europe and with important markets like the USA, Canada and China,” they write.



“And these effects, though one-off, would persist for many years. Thus the economic arguments are clearly in favour of remaining in the EU,” they conclude.



The City is bracing for a volatile week of trading and as dealers prepare to spend the early hours of Friday morning placing orders for investors as the results start to come in from around 12.30am. Some City sources are warning that trading could “gap down” – or open sharply lower – in the event of a vote for Brexit.

Others, though, think the result could having a calming influence after a period of uncertainty. Jasper Lawler, market analyst at spread betting and financial trading site CMC Markets, said that “knowing the results is going to calm nerves”.

One of the letter’s signatories, Professor Christopher Pissarides, who is based at the London School of Economics, told the Guardian the uncertainty would reduce investment and hit job creation.

He also warned that the vote, at the start of Britain’s summer, would trigger a depreciation in the pound that would make holidays more expensive. There are suggestions sterling could slide from its current levels of around $1.42 to $1.20 and reach parity with the euro, from around €1.27 now.

In response to criticism by Vote Leave, which accuses economists of scare-mongering, Pissarides said that forecasting was difficult, and economists might disagree or get it wrong, but in this case they were overwhelmingly in favour of remaining.



He said it was absurd that out campaigners were trying to dismiss economists as irrelevant.



“Britain will not thrive outside the EU,” he added. “The biggest negative impact will be felt over the next five years, but it will persist through the lack of investment and the weaker bargaining position that Britain will have in future negotiations.”



In preparation for the vote, banks have set up war rooms across the City, and senior bankers will be on call through out the early hours of Friday. Cash machines will be fully stocked and IT upgrades put off until the outcome of the vote is known to ensure that customers will not encounter any problems accessing their money.

Firms such as Lloyds Banking Group and Royal Bank of Scotland along with US groups such as JP Morgan Chase and Citi will have teams working through the night. Brokers are also warning that higher than expected volumes might mean they are not able to complete all their trades as quickly as usual.

Stockbroker Charles Stanley has told clients: “Whatever the results, we anticipate that we may experience higher volumes and more market volatility than usual on the 23 June and in the days following the vote.”

“The immediate impact is likely to be felt most directly by those of you wishing to trade shares during such market conditions. Foreign exchange rates could also witness fluctuations and this has the potential to impact overseas trades placed during this time,” Charles Stanley said, warning that order sizes may be reduced and it could take longer to answer phones.

Some economists,argue interest rates could be cut, possibly to zero from their record low of 0.5% where they have been stuck since the financial crisis. Analysts at JP Morgan said rates could be cut by a quarter of a percentage point as soon as next month’s meeting of the rate-setting monetary policy committee. Another quarter point cut could take place in August.



“The speed and magnitude of the response will be sensitive to moves in financial markets; the MPC likely would interpret a weaker currency as reflecting weaker growth expectations provided it is accompanied by weakness in other UK asset markets,” the JP Morgan analysts said.

Many investors are expected to go into the vote without any large trading positions which could expose them to losses once the result comes in, reducing volumes and exacerbating any price movements once the outcome is known.

“An absence of market liquidity implies that we could see sharp moves in prices and heightened volatility in the hours following the announcement,” said analysts at Jefferies. They pointed to the European Central Bank’s scheduled injection of cash into the markets at 10.30am on 24 June as helping to fend off any liquidity crunch. Along with the Bank of England, the ECB will be on alert for a funding crisis facing the banking sector.

On Tuesday the Bank will conduct the second of its pre-announced funding calls for banks. Mark Carney, governor of the Bank of England, has said another will take place on 28 June. “Beyond providing liquidity, both the BoE and ECB could cut interest rates,” the Jefferies analysts said.

Sentiment towards the banking sector has already been hit hard by the Brexit vote. Analysts at Bernstein have predicted Barclays would be hardest hit, with its shares falling 40% over 18 months after a Brexit vote while the two bailed-out banks – Lloyds Banking Group and Royal Bank of Scotland – could take a hit of 35% and 25% respectively. Falls of that magnitude would impede any chances of cutting the government’s stake in both the banks.