Evidence that investors are shifting billions of pounds out of British assets is just a ‘taste of things to come’ if we vote to leave the EU, the Chancellor has warned.
His comments come after discovery that £65bn either left the UK or was converted into other currencies in March and April – the fastest rate since the financial crisis in early 2009.
The figures, published by the Bank of England in its monthly register of banking statistics, represent the first evidence of capital flight from the UK – where money rapidly flows out of a country or out of that country’s assets in response to concerns over economic instability.
They are consistent with the sharp falls in the pound over the period, which is regarded as a barometer of international fears about Brexit.
Responding to Sky News’ findings, George Osborne said: “Financial markets are telling us what all the evidence shows: that Britain will be permanently poorer if we vote to leave the EU and the single market.
![UK CHANCELLOR OF THE EXCHEQUER: George Osborne](https://eagle.co.ug/wp-content/uploads/2016/06/GEORGE-OSBORNE.jpg)
“If we vote to leave, what we are seeing now is just a taste of things to come.
“If we vote to remain, the British economy can go from strength to strength.”
One of the worst months for capital flight appears to have been March, when the outflow was £59bn – the equivalent of £1.3m a minute for the entire month.
This was the second biggest single-month fall since records began, and March had been the first full month of the referendum debate after Boris Johnson joined the Leave campaign.
The Bank of England figures, which measure flows of cash in and out of sterling, are volatile but have deteriorated dramatically recently.
In the six months to the end of April, some £77bn left the sterling system.
That compares to a fall of just £2bn in the six months to the end of October 2015.
Conservative MP John Redwood, however, has labelled Mr Osborne’s response ‘alarmist rhetoric’ which ‘betrays a growing desperation in Number 10’.
![RESIDENT AT 10 DOWNING STREET: UK Prime Minister David Cameron](https://eagle.co.ug/wp-content/uploads/2016/06/CAMERON.jpg)
“Any serious economist will tell you that the pound is up against the dollar since February, and the UK’s foreign exchange reserves have increased this year,” Mr Redwood, a Brexit supporter, said.
“We are the fifth largest economy in the world, and will fare perfectly well outside of the EU – as the Prime Minister himself acknowledged.
“In fact, the economic health of this country will increase when we detach ourselves from the perilous state of the eurozone.”
Although the capital flight could be influenced by a number of other factors – such as changes in the balance of payments and appetite for other currencies – economists said that it is clear that they are being primarily driven by concerns about the referendum.
Simon Ward, chief economist for Henderson Global Investors, said: “Investors are obviously concerned that in the event of a Brexit, the economic outlook will be very uncertain – investors dislike uncertainty – so they want to reduce their exposure to the UK equity and bond markets to reduce that risk.”
The Bank of England itself has warned repeatedly about the economic risks posed by a possible Brexit.
![Bank of England GOVERNOR: Mark Carney](https://eagle.co.ug/wp-content/uploads/2016/06/CARNEY.jpg)
Governor Mark Carney has not been commenting on the referendum since the so-called ‘purdah’ period began, but he is known to be concerned about volatility in the financial markets ahead of the vote.
However, the scale of the impact has nonetheless taken many by surprise.
Official economic growth figures are expected to show a sharp fall in UK output in the second quarter, as businesses delay investment plans and consumers put off spending ahead of the referendum.
With economists warning of a potential recession if the UK votes to leave on June 23 and with the polls narrowing in recent weeks, some expect the slowdown to worsen in the coming fortnight.