Growing anxiety over the UK’s EU referendum has driven sterling down to a new seven year low. The pound fell as low as $1.3879, as cabinet ministers clashed over the legal strength of Britain’s new deal with Europe.

Investors are also scrambling to protect themselves against fresh volatility ahead of the June referendum. The cost of insuring against sterling volatility has hit its highest level since 2011.

IMF chief Christine Lagarde has warned that Britain, and Europe, would bother suffer if the UK quits the EU. She fears that the uncertainty will hurt growth, at a time when the world economy is already fragile.

The Fund also cited June’s referendum as a potential threat to the UK’s recovery.

Several other City bosses have warned against Brexit. Ryanair, the budget airline, has even pledged to campaign actively to keep Britain inside the EU.

HSBC has predicted that the pound would slump by 20% in the event of a Brexit vote. It also warned that growth would fall sharply, with the housing market and the banking sector also vulnerable.

A poll of City economists has also predicted that the pound will tumble further if the Out campaign wins.