Urging Westminster to get its act together, Mohamed El-Erian said that if they fail to come up with a credible "Plan B" that includes a free trade agreement linking it to the European economic zone, the sterling could fall towards parity with the dollar meaning roughly 25% of the country’s wealth could disappear overnight.
The former PIMCO chief executive claimed that the future of the British currency depends on whether politicians can provide a credible plan for the country’s transition telling Reuters that "after the Brexit referendum, the UK has to urgently get its political act together."
"'Plan B' depends on the politicians in London and across the Channel, but so far they have not stepped up to their economic governance responsibilities," opined El-Erian.
The British Pound has already shed roughly 15% of its value in recent weeks having stood at $1.50 on June 23, the day of the referendum, before cascading down to $1.28 earlier this week.
"Think of the sterling as facing a double whammy with no strong anchor," said El-Erian.
The Bank of England is hamstrung to provide an anchor in the form of higher interest rates under current arrangements, but the country desperately needs a force to stave off the capital flight due to growing uncertainty about future trading relations and foreign investment.
"The future value of sterling is a function of how and how quickly the structural uncertainty is resolved – if Plan B is delayed and/or it doesn’t involve much of a free trade set-up with the EU, it is not inconceivable for sterling to head to parity with the US dollar," opined the economic expert.
"If, however, there is agreement between the UK and its European partners on a new arrangement that allows for sufficient free trade access, sterling could end up appreciating from its current levels."
El-Erian remains not altogether certain whether Britain will actually follow through on its threat to abandon the European experiment, but with the UK government rejecting the plea of 4.1 million voters for a second referendum it seems only a matter of time before the next shoe drops.