Fewer than a quarter of corporate treasurers have put hedges in place to protect against market volatility in the event of the UK voting to leave the European Union.

Britain is holding a referendum on June 23 on whether to remain or leave the EU, which has been dubbed “Brexit”.

Dr Tobias Miarka, who leads the European business at consultancy Greenwich Associates, said in a webinar today that just 23% of corporate treasurers have put hedges in place to protect against volatility despite expecting an increase in both foreign exchange and interest rate volatility in the event of a vote to leave. In addition, corporate treasures expect financial instability to increase, liquidity and funding costs to rise and trade barriers to increase after Brexit.

He added this was the most surprising finding in the Greenwich survey. Greenwich Associates interviewed 90 corporate treasury professionals at corporations with sales in excess of €500m ($560m) between April 12 and 27. In the survey 21 corporates were domiciled in the UK and the remaining 69 in continental Europe, although 80% of these have operations in the UK.

Miarka said: “Corporate treasurers had thought Brexit was very very unlikely but are now starting to think it may happen. They were very honest in interviews and some admitted they had been tardy and did not want to think about the problem, while others thought hedging costs were too high or that it was now too late to start.”

Just 47% of UK corporates and 42% of Europeans though it was likely or extremely likely that the UK will vote to remain. Non-partisan UK blog Number Cruncher Politics, said the latest probabilities for the referendum results were 46.5% for vote remain and 42.1% for vote leave using data up to May 18.

There was a big difference between UK and European firms in the Greenwich survey on the consequences of Brexit. In Europe 81% of respondents said there would be a disorderly exit from the EU, while this was just 19% for UK firms. Miarka said: “There is a lot of wishful thinking on the UK side.”

Some continental corporate executives also said they are already planning to move operations in Britain back inside the EU, should the UK vote to leave. “Continental corporates also said there would also be a diminished need for UK banks to provide cash management services in the event of a Brexit so UK banks would lose corporate clients,” added Miarka.

The Institute of International Finance, the research provider, said in a report today that a Brexit vote would likely tip the UK into recession in the second half of this year, particularly given the volatility that would hit the City of London.

The IIF added: “Negative implications of a Brexit may be particularly significant for the UK financial sector, which would pay a high cost for the loss of the financial services passport. On the regulatory front, the end result would likely be much negotiation – but no less regulation.”

There would also be a surge in global market volatility, particularly in foreign exchange markets, with sterling and euro both under pressure and weaker growth prospects would hit European equities.

Thomas Clarke, partner at William Blair, said in a blog that the fund manager had reduced its long UK equity exposure even though equity is fundamentally attractive in the UK due to the referendum. William Blair managed $64.3bn in assets at the end of March.

Clarke added: “We increased our short exposure to the fundamentally unattractive British pound, which we have implemented by adding a put option that also benefits from increased volatility.”

Viktor Nossek, director of research at ETF issuer WisdomTree Europe, said in a report that the Brexit scenario is the worst possible outcome for Europe’s financial markets.

Nossek said the euro is also at risk of succumbing to selling pressure, as fringe parties will seek to exploit Brexit by pushing their own national agendas at the expense of a European-wide plan to tackle budget deficits, unemployment and immigration.

“Until the EU shows unity in how to deal with unemployment and immigration, the crowded trade in Europe’s safest safe havens, including the German Bund, is likely to intensify, driving interest rates deeper into zero and sub-zero territory,” he added. “ Asset allocators targeting a minimum equity exposure may position defensively in broad diversified high dividend yielding stocks, while currency hedged exposures to European equities could regain appeal if the exposure to Europe’s risk asset is sought by foreign investors.”

He continued that the downbeat sentiment in risk assets is expected to also be a boon for gold.

“Portfolio inflows into the UK – mainly debt securities – have recently come off from historic peak levels when compared to GDP, suggesting that the uncertainty caused by Brexit – including a potential downgrade on the longer term outlook on UK’s sovereign debt by credit rating agencies –could reinforce the slowdown of the inflows into sterling assets, if not altogether compel foreign investors to cut their exposure,” Nossek added.

More on Brexit:

• Brexit Won’t Remove EU Compliance Mandates
• Hermes Warns of Brexit Risk to Asset Managers
• AFME Warns on Brexit