Lloyd Dorfman: Forget Project Fear, it’s Project Dear for us if we leave the EU

Contrary to what some people think, there are also a large number of entrepreneurs who favour In. This was demonstrated by last month’s open letter signed by hundreds of entrepreneurs and founders of tech start-ups.

As I built up Travelex into an international business, people ask me what the effect of a Brexit would be on the pound. While I always say I am more of a builder of businesses than a currency expert, I am extremely concerned about the impact of Brexit on the pound, and the uncertainty that would be created.

We saw concern over the referendum cause the pound to drop to a seven-year low in February, so there has been volatility at the start of the campaign. It has recovered since, for a number of reasons — not least the confidence injected by President Obama’s visit (it reached a 10-year peak against the dollar in late April).

It would be foolish to make any rash predictions. Consequently, I will not predict Armageddon in the face of Brexit.

Those who forecast the demise of the UK economy if we did not enter the euro in the late Nineties have been eating their words since. (As it happens, I was opposed to the UK joining the single currency.) Exchange rates in particular, and economics more broadly, are not an exact science, but I am concerned that the pound would drop significantly on a Brexit. This is corroborated by research from leading banks which have predicted sterling could lose 20% of its value in the face of Brexit.

A small drop in the pound may be beneficial for our exports but it would lead to rising prices, and I fear that the volatility, likely to be protracted and enduring, would be bad overall.

Analysis by the Bank of England shows that the potential benefits of a 10% fall in the pound on exports and growth would be nullified in the face of a Brexit. A weak pound would also make overseas holidays for British people more expensive for a prolonged period.

Concern about the effect on the pound has forged some unusual alliances. Two weeks ago, David Cameron and Brendan Barber warned that “leaving Europe would cause pressure on the pound”. That was an unlikely coalition between a Conservative PM and a former head of the TUC.

Besides the pound, our EU membership helps London’s position as a leading financial centre. The UK accounts for 78% of all EU foreign exchange trading. We can proudly say that London trades more dollars each day than the whole of the US, and twice as many euros as the eurozone.

There is also ample evidence Brexit would adversely affect jobs, trade and investment. While there are lots of arguments for staying in, the three overwhelming ones for me focus on the three “C”s of competitiveness, certainty and co-operation. First, the UK economy benefits from being part of the single market of 500 million consumers. (Continental Europe was the first overseas market I took Travelex into, when we entered the Netherlands and Belgium in the mid-Eighties.)

Second, a Brexit would create enormous uncertainty around our future trading and economic relationships with the rest of the EU and the rest of the world. Third, the EU is an important forum to address cross-border challenges like climate change, and co-operation is always better than isolation.

We were right not to join the euro (I think the whole idea is fundamentally flawed) but our currency and economy will be much stronger as a member of the EU.

As the fifth-largest economy in the world, we sometimes underestimate our strengths. After all, we rode out the worst financial crisis in 80 years as the fastest-growing economy in the G7. That was the ultimate “stress test” for the UK economy, and we came through it. But the good work will be threatened if we do not make the right call in this historic referendum. Leaving the EU would be the biggest own goal in our post-war history.

Lloyd Dorfman CBE is the founder of Travelex and chairman of The Office Group and Doddle