A vote to leave would likely see a further depreciation. But how much? A lot of analysis has focused on the early 1990’s period when the UK was forced to withdraw from the Exchange Rate Mechanism. But while it’s true that the UK’s current account position is just as bad as that period, making sterling susceptible to capital flight, there are key differences.
In the early 90’s sterling was being propped up at unsustainably strong levels, showing a 20% overvaluation on the OECD’s fair value measure. That sort of overvaluation is not present this time. A vote to leave the EU may not be the catastrophic event for sterling that many believe.