Sterling is likely to fall by a fifth in the immediate aftermath of a British vote to leave the EU on June 23, triggering intense inflation pressure, Britain’s National Institute of Economic and Social Research said yesterday.

NIESR, an academic research body, said that if Britain voted to leave the EU, the economy would be one per cent smaller in 2017 than if it stayed in, and 2.3 per cent smaller by 2018.

“Heightened risk and uncertainty will cause sterling to depreciate by around 20 per cent immediately following the referendum, which will result in an intense bout of inflationary pressure,” NIESR said.

NIESR’s forecast of the short-run impact of leaving the EU is similar to that produced by some banks. Its forecast of the longer-run impact is less than that of Britain’s government, which NIESR said was partly because it did not attempt to model the longer-run impact of Brexit on British productivity, though it said this was likely to be negative.

NIESR said it expected British GDP by 2030 to be 1.5-3.7 per cent lower if it left the EU than if it stayed, depending on how favourable a trade deal Britain reached.

Real wages were forecast to be 2.2-6.3 per cent lower if Britain left.

If Britain stays in the EU, NIESR said it expected the economy to expand by two per cent this year, 2.7 per cent in 2017 and 2.5 per cent in 2018.