Global banks and international bond strategists have been left stunned by revised ONS figures showing that Britain is £490bn poorer than had been ­assumed and no longer has any reserve of net foreign assets, depriving the country of its safety margin as Brexit talks reach a crucial juncture.

A massive write-down in the UK balance of payments data shows that Britain’s stock of wealth – the net international investment position – has collapsed from a surplus of £469bn to a net deficit of £22bn. This transforms the outlook for sterling and the gilts markets.

“Half a trillion pounds has gone missing. This is equivalent to 25pc of GDP,” said Mark Capleton, UK rates strategist at Bank of America.

Making matters worse, foreign ­direct investment (FDI) by companies is plummeting. It fell from a £120bn surplus in the first half 2016 to a £25bn deficit over the same period of this year.

The apparent resilience of FDI flows shortly after Brexit was an illusion: the spending that took place in late 2016 had already been committed earlier. The big devaluation since late 2015 ­automatically improved the UK’s net asset profile enormously but clearly not enough. The supposed surplus has gone up in smoke. It implies that the UK’s underlying position going into the referendum was much weaker than anybody realised. The concern is that the external forces supporting sterling and gilts are all in doubt as major central banks tighten policy and drain global liquidity.

An EU flag flies in front of Big Ben credit: Oli Scarff/AFP

The Bank of New York Mellon, the world’s biggest custodial institution with $31 tn (£23 tn) under purview, says its flow data shows a marked deterioration over recent weeks in purchases of sterling assets by “real money” players such as pension funds and sovereign wealth funds.

“The outflows from the UK began in mid-August,” said Simon Derrick, the bank’s currency strategist, “the big buyers are disappearing”.

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This has been cushioned by a surge in speculative buying of sterling by hedge funds, mostly betting on a UK rate rise. Positions on the Chicago Mercantile exchange have swung from heavily net short to net long by 19,949 contracts. However this buying is fickle. “Speculators can change in a heartbeat,” said Mr Derrick. “The worry is that the pound could really go. If the history of the past 40 years is any guide it could fall another 20pc once it does.”

Bank of America said the data revisions make Britain more vulnerable as it tries to cover a current account deficit stuck at 4.6pc of GDP, calling it sterling’s “Achilles’ heel”. The country ­requires constant flows of imported capital to cover excess consumption.

The Office for National Statistics (ONS) said these revisions to the “Blue Book” stem from the discovery that Britons own fewer foreign shares than previously thought, and foreigners own more British assets.

Company profits are lower than imagined. What was thought to be ownership of foreign debt securities by UK corporates have turned out to be loans to over-leveraged UK citizens.

Mark Carney, the Governor of the Bank of England, warns that Britain is overly reliant on the “kindness of strangers” to plug the current account gap. Inflows have held up well so far in the current global climate. Yield-starved investors are willing to buy almost anything – even 100-year Argentine bonds – but there are signs that easy sources of capital are about to dry up.

Mark Carney, the Governor of the Bank of England, warns that Britain is overly reliant on the “kindness of strangers” to plug the current account gap credit: aNDY RAIN/epa

Over recent months sterling and gilts have been propped up by huge sums leaking out of the eurozone and into UK assets as a side-effect of QE by the European Central Bank. Many of the ECB’s bond purchases occur in London. Banks rotate the proceeds into UK bonds to capture a richer yield.

David Owen, from Jefferies, says the ECB is covering most of the UK current account deficit, a bizarre situation that is greatly under-estimated by the market. ECB data show that eurozone net purchases of UK “debt securities” were running at an annual rate of £68.7bn in the second quarter.

Mr Owen said: “What happens to the gilt market and sterling when the ECB steps back? The fact is that a current ­account deficit of almost 5pc of GDP is not sustainable in a post-Brexit world.”

The test will come at the end of this year when the ECB cuts its purchases of eurozone bonds from €60bn a month to nearer €30bn, before winding down QE altogether later in 2018. “You can very easily construct a scenario where this goes pear-shaped for Britain,” said Mr Owen. “You could have a gilts strike. The risk for a small open economy like ours is that the Bank of England may ultimately have to raise rates to defend sterling. We have been here before when Britain had to go the IMF in 1976.”

The spectre of a forced UK rates rise into the teeth of a downturn – a fate usually confined to emerging economies – raises the stakes of a hard Brexit. The scenario is increasingly discussed sotto voce in the City, as Philip Hammond is undoubtedly aware.

This would be a traumatic episode for Britain but it would also be dangerous for Europe. In a worst-case scenario, the EU would face WTO tariffs in its biggest market, one where it enjoys a big structural surplus – much of it selling ­expensive brands easily identifiable to British consumers.

North European supply chains would be in mayhem. A broken pound – potentially worth 0.90 euros – would render many EU exports unsellable in the UK. The eurozone would lose ­access to capital market funding and derivatives, which could not be replicated quickly. Such a deflationary shock might push the southern eurozone back into a debt-deflation crisis. City veterans call it “mutual assured destruction”, although it is not clear whether Europe’s political class fully understands this.

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For Britain, much would depend on whether any fall in sterling was “disorderly”. In a world of near zero-rates, where every developed economy is trying to hold down its currency, ­devaluation has a silver lining. A weaker pound might make it easier for the Bank of England to restore the ­interest rate structure to normal levels, achieving the holy grail of Wicksellian equilibrium that eludes others. The long-term trade-offs are more complex than they appear at first sight.

Yet it is a grim time for Brexit optimists. They had hoped that the windfall effect of devaluation would narrow the trade deficit. But if the weaker pound was going to feed through into better exports and into import substitution – after the usual “J-Curve” delay – the evidence should be emerging.

So far, little is happening, either because British exports are less “price elastic” than in the past or because businesses are freezing investment ­until there is clarity on Brexit. It is a bitter blow for the Government.

Bank of America’s Mr Capleton says the UK is left facing a “triple deficit problem”. The household savings rate is close to a half-century low of 5.9pc. There is not enough internal funding in the UK to soak up the budget deficit, which could reach 4pc to 4.5pc of GDP next year if pessimists at ABN Amro and Natixis are right. A weak pound has made no dent on the trade deficit.

The awful discovery that Britain’s half a trillion pound reserve does not in fact exist could bring matters to a head swiftly and brutally.