IMF chief warns UK against Brexit

IMF chief: 'Brexit' a negative on all fronts

The head of the International Monetary Fund thinks Britain should stay in the European Union, or both will suffer.

Christine Lagarde spoke out against a Brexit in an interview with CNNMoney on Wednesday. Trade and financial ties, and migration between Europe and the U.K., had boosted growth, she said.

"My hunch ... is that it is bound to be a negative on all fronts," Lagarde said. "For those that stay, because there are fewer of them, and for those who go, because they lose the benefit of [that] facilitation of exchange."

The U.K. will hold a referendum on membership in the EU on June 23, and markets are becoming increasingly concerned about the impact on trade, jobs and investment if voters choose to leave the bloc of 500 million people.

The British pound fell to $1.39, its lowest level in seven years, on Wednesday.

HSBC analysts said a Brexit vote could send the pound crashing by 20% to levels last seen in the 1980s.

"Following a vote to leave, we think uncertainty could grip the U.K. economy, triggering a potential slowdown in growth and a collapse in sterling," the bank said in a research note.

Lagarde said the consequences are already being felt.

"Uncertainty is bad in and of itself," she said. "No economic player likes uncertainty. They don't invest, they don't hire, they don't make decisions in times of uncertainty."

Related: British pound hit as risk of Brexit rises

Sunday's news that some prominent politicians, including London mayor Boris Johnson, were backing the Brexit campaign have prompted betting firms to cut the odds on the U.K. leaving the EU.

Opinion polls show voters in Europe's second biggest economy are deeply divided over the issue, and many remain undecided.

Prime Minister David Cameron argues that being part of the club is good for the British economy. But his opponents say EU membership is costly, creates regulatory red tape and allows unlimited immigration.

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