Fathom Financial Consulting said the UK’s economic output would drop 5.2% next year if the currency broke up and caused a banking collapse.
The Times reports that figure was compared to a 5% decline in GDP in Germany and 4.3% in the US.
The report said the UK would suffer disproportionately because of its large financial services sector and overvalued housing market. It added a flood of cash into sterling would also drive up the pound and crush exports.
Speaking at the firm’s Monetary Policy Forum, director Danny Gabay predicted the Bank of England would have to increase its quantitative easing programme to £1trn to manage the situation.
Former deputy director of the Bank of England Sir John Gieve said Fathom’s estimate was modest and investors would flee Britain amid fears about the “knock-on damage of a eurozone break-up”.
