Here's what will happen on Friday if Britain votes to leave the EU
HSBC's chief economist Simon Wells and his team have mapped out what they see as the "near-term economic and market impact of a vote to leave" in a note titled "What if it's Leave?" sent to clients on Monday.
The two key features of Wells' forecasts are an immediate 15% drop in the pound against the dollar, with an initial fall for the euro too, and a global move to "risk-off," meaning investors sell stocks in favour of bonds. The FTSE 100 would likely nose dive.
HSBC also says that: "After a Brexit vote, it is likely Mr Cameron would face pressure to resign." If the Prime Minister does quit it would likely leave the Conservatives in turmoil, already reeling from a bitter and divisive campaign battle over the referendum.
HSBC's vision of the immediate aftermath of a Leave vote matches up with the forecasts of Mohamed El-Erian, the chief economic adviser at Allianz SE and PIMCO boss, who wrote a column for Bloomberg on the likely outcome.
Wells and his team think the Bank of England may have to step in and provide liquidity, particularly if there is a shortage of US dollars in London. But HSBC sees market intervention unlikely unless currency markets are particularly dire. This is because it would likely have to devalue the pound to try and attract foreign investment, something it needs to do to fund UK's deficit.
HSBC says the "main near-term economic impact to be elevated uncertainty." This will hit spending by businesses and individuals and "the impact would likely be most keenly felt in investment, if firms delayed spending until more clarity emerged about the UK's post-EU arrangements." As a result, the bank estimates GDP growth will be 1% to 1.5% lower in 2017 than it would have been otherwise.
The bank also expects a jump in inflation of 3% to between 4% and 4.5% by late 2017 as a result of the expected collapse in the pound. If the pound becomes cheaper on the international market, it will cost more to import goods and the cost of everything from bananas to TVs that are shipped from overseas will have to rise as a result.
HSBC doesn't expect a "knee-jerk" interest rate cut because of stagnant growth and rising prices. HSBC says: "If uncertainty about the UK's future relationship with the EU paralysed decision-making and spending, a modest reduction in funding costs would not help resolve that uncertainty."
More likely, Wells and his team thinks, is looser fiscal policy - more borrowing and less focus on reducing the deficit. The bank writes:
In any case, were there to be a change of leadership within government following the vote, the fiscal targets might become less of a priority. Looser fiscal policy would help mitigate the growth impact of weaker investment. And if higher borrowing started to put upward pressure on gilt yields, it could be accompanied by another round of QE.
And the rest of Europe?
HSBC's chief European economist Karen Ward also examines the possible effects of a Brexit - a British exit from the European Union - on the EU. She and her team estimate a 0.2% downward revision to GDP growth forecasts in 2016 and 2017 but say "political contagion could be significantly more damaging."
They write: "In the UK referendum, the key arguments for the Leave campaign essentially boil down to questions over migration and sovereignty, which are concerns for much of the EU electorate."
Far right and left parties across Europe, already gaining ground, could be further encouraged. This could create yet more uncertainty as investors fear similar referendums across the continent. Investment and markets would suffer as a result.
With just days until the referendum on June 23, the polls appear to be moving in favour of the Remain camp. A poll for the Mail on Sunday by Survation gave the In campaign 45% of the vote against 42% for Out. A separate poll for the Sunday Times by YouGov had Remain at 44% to Leave's 43%, and an Opinium poll for the Observer put the two sides neck and neck at 44%.
The results are a stark contrast to multiple polls last week that gave the Leave camp as much as a 6 point lead, leading to fears that Britain was hurtling towards a "Brexit" - a British exit from the European Union.