Brexit risks increase to 35%, says Berenberg

Economists at Berenberg see an increased likelihood of a British exit from the European Union, or 'Brexit', after a shift in public opinion polls towards support for the "leave" campaign, dragging the pound to long-term lows.

According to reports earlier in the week the UK will go to the polls on 23 June to vote in a referendum on continuing membership of the European Union.

The German bank upped its risk of a Brexit to 35% from 30%, saying its monitoring of newsflow had shown a fivefold increase in "Brexit news" since the start of the year, with events in Cologne and Paris adding to the heavy flow of news on the EU migrant crisis.

Wednesday saw a prime example, with a new hoo-ha erupting around the unsympathetic reference from Prime Minister David Cameron to refugees living in the Calais camps as "a bunch of migrants".

Berenberg's senior UK economist Kallum Pickering said: "The risk that the EU referendum becomes a vote on immigration rather than about membership of an economic and political union is a significant threat".

He noted that sterling pricing was beginning to reflect heightened risk, with the pound weakening by over 6% in the last month.

While Pickering is more confident the UK will vote to remain in the EU, with Cameron likely to secure agreement to his concessions and gain the support of the British public, he said if risks remain elevated or even increase leading up to the vote, "heightened uncertainty is likely to cause a modest disruption to economic and financial market activity until after the referendum has passed".

UK business interests are generally supportive of the UK remaining in the EU, with economists having warned that a Brexit would prove harmful for the economy.

Bank of England Governor Mark Carney on Tuesday said that Brexit fears could pose a current account deficit risk, part of the rate-setting committee's reasoning behind delaying an eventual rate hike.

Credit Suisse earlier in the week said a Brexit could see a further sharp drop in the pound and lead to an "immediate and simultaneous economic and financial shock for the UK", amid a toxic mix of depressed confidence, tightening financial conditions and falling real incomes.

Not only that, but it would be likely to reignite and strengthen Scotland's push for independence, ratings agency Fitch has said.