STERLING volatility surged to levels not seen since the financial crisis after three separate opinion polls put the Leave campaign in the lead ahead of this month's referendum on the UK's place in the EU.
David Cameron, the Prime Minister, warned of a "decade of uncertainty" if Britain voted to leave the EU, while Boris Johnson, the former London Mayor, said it was a "delusion" to
believe that "bartering away our freedom and democracy" would boost UK prosperity.
As the rival camps clashed on the economy, the price of insuring against a collapse in the pound against the dollar jumped to its highest since the start of 2009 after a poll showed 45pc of Britons would vote to leave the EU on June 23.
One-month implied volatility climbed to 22pc after YouGov's online poll of almost 3,500 people showed that just 41pc would vote to stay in.
A separate online survey by TNS showed 43pc backed a leave vote, while 41pc said they would vote to remain.
The pound fell by as much as 1.5 cents - or 1.2pc - against the dollar to $1.4353 after the polls were released. Sterling also slipped by more than a cent against the euro, to euros 1.2649, and fell against a basket of other major currencies.
The pound recovered slightly in late trading following a renewed sell-off
after an online poll by ICM showed a bigger lead for the Leave campaign compared with a week ago. The ICM survey of 2,000 people conducted over the weekend showed 48pc of Britons would vote to leave the EU, up one percentage point on last week, against 43pc who said they would vote to remain.
With just over a fortnight to go before the referendum, betting markets still put the Remain campaign in the lead, with a 72pc chance Britons will vote to stay, compared with 28pc for leave. However, the probability of a leave vote has climbed from less than 20pc last month.
IG, the spread-betting group, said clients were now putting more money on a Brexit vote than Remain for the first time since the market was created at the beginning of 2016.
Mr Cameron said a Brexit vote would cost jobs and push the UK into recession, while protracted trade talks with the rest of the world would lead to years of uncertainty.
"Add those things together - the shock impact, the uncertainty impact, the trade impact - and you put a bomb under our economy," he said. "And the worst thing is we'd have lit the fuse ourselves."
His comments were echoed by Janet Yellen, the chairman of the US Federal Reserve, who warned that a vote to leave could trigger a "shift" in investor sentiment. "A UK vote to exit the European Union could have significant economic repercussions," she said.
The National Institute of Economic and Social Research (NIESR), Goldman Sachs and HSBC have warned that the pound could plunge by as much as 20pc if Britain votes to leave the EU.
Asked about the decline in the value of the pound after the opinion polls were released, Mr Johnson said: "The pound will go where it will over the short term. But, believe me, in the long term you can look forward to fantastic success for this country. I think the pound's value will depend entirely on the strength of the UK economy."
Kallum Pickering, senior UK economist at Berenberg Bank, said online polls were less accurate than phone polls because participants usually had stronger opinions on the EU.
He said the three online polls released yesterday did not yet signal a massive shift in sentiment.
"It is not unusual to see clusters of online polls in favour of Leave. The latest online polls, therefore, do not yet decisively demonstrate that the Leave campaign gained much ground," he said.