Brexit: A populist revolt against the political elite

"What we're seeing is a populist revolt against the political elite," says Prasanna Gai, Professor of Macroeconomics at the University of Auckland.

"It's not just in the UK it's around the world, the US with Trump and Saunders. This is a ground swell of discontent."

As Britons vote on whether to stay in the EU tonight, late polling showed the outcome was too close to call - rattling markets which earlier in the week had bet on the stay vote coming home strong.

The strength of the leave vote was something markets, politicians and bureaucrats were going to have to notice of regardless of the outcome due later this afternoon, said Gai, who was senior Adviser at the Bank of England from 1994 to 2007 and was Special Adviser to the Government the Bank of Canada between 2010 and 2011.

It appeared to be a reaction against increasing globalisation and was now a bellwether for these kind of populist uprisings, he said.

But if the leave vote wins it would be extremely bad for the UK economy.

The UK faced a long and deep recession if voters decided to abandon Europe, he told The Economy Hub video show.

"The UK will certainly tip into recession and stay there for a long time."

There would be a negative effect on investment, demand and consumption.

"What will happen, on impact, is the exchange rate collapses, there will be a run on the pound." said Gai.

Britain was already running a sizeable current account deficit and this would make them vulnerable to a currency collapse.

But the big fear for the local economy was the fear of a contagion effect to Europe which spooked markets and slowed global growth.

Brexit would also have a big impact on Europe and that had the potential to spill over in to a wider global slow down, Gai said.

It represented a big problem for central banks particularly Europe where interest rates below zero and had very little room to move if the economy slowed further.

"This is a problem central bankers will not being enjoying at all," he said.

If the public did vote to remain it would be less dramatic but there would still be long term issues to address, Gai said.

"If it doesn't go through I think it will be a salutary wake up call for the politicians and the elites. It won't be business as usual."

ASB senior economist Jane Turner said she expected to see a great deal of market volatility in the next 24 hours before the result became clear.

Already in the past week or so we had seen the kiwi dollar fall on Brexit fears and then rally as polls showed it was less likely.

The US dollar has gained as a safe haven for traders.

If the remain vote won then we could see that rally continue on putting further pressure on the New Zealand Reserve Bank to cut rates, Turner said.

Only about five per cent of New Zealand exports now go to the UK so the direct trade impact was limited, she said.

"It's not really a prominent market for New Zealand anymore."