BlackRock has warned in a research paper a potential Brexit holds 'a lot of risk with little obvious reward' for the UK economy.
The report Brexit: Big Risk, Little Reward - The UK Referendum on Europe has been published by the BlackRock Investment Institute, authored by the firm's five top executives, including vice-chairman Philipp Hildebrand (pictured).
The paper warns that Britain's exit from the European Union would offer a lot of risk with little obvious reward, as it would lead to lower UK growth and potentially higher unemployment and inflation.
The UK could face reduced ability to negotiate regulatory standards for EU market access, the loss of a major budget contributor, and the emboldening of populist political parties, the paper cautions.
The researchers said: A newly independent UK would likely have reduced leverage to fashion trade deals for the crucial services sector and less clout to negotiate regulatory standards for EU market access.
"Both would be lengthy and painful processes, and we see the UK as economically worse off in the end."
BlackRock also forecasts increased volatility in UK and European assets, higher gilt yields and pressure on sterling. Conversely, depressed sterling could bounce back if the UK votes to remain, it said.
The report also warns Brexit would negatively hit domestically-focused UK equities, while large-cap overseas earners would outperform.
Turning to central banks, BlackRock said the Bank of England would likely cut rates in the event of a Brexit or even revive quantitative easing, despite any temporary rise in inflation caused by a weaker currency.