Sterling dropped by two cents to a three-week low against the US dollar - this morning €1 buys 78p.

It was also down against the euro and hit a two-year low against the yen after London mayor Boris Johnson and a number of Cabinet ministers said they wanted to leave.

The fall in the pound came after an EU reform deal reached by Prime Minister David Cameron ahead of an in-out referendum on June 23 that failed to satisfy his eurosceptic critics.

However, Mr Cameron looks set to win the backing of dozens of FTSE 100 listed companies which are preparing to issue a warning on the threat to investment and jobs should the UK leave Europe.

Meanwhile two polls by business groups showed a majority of firms backing continued membership.

In shares, the FTSE 100 Index looked untroubled by the latest developments, heading back above the 6,000-mark following turbulence in recent weeks. 

A broker note from JP Morgan upgraded UK shares, judging that Britain would choose to stay in the European Union and that even it did leave, the fall in the pound and likely action from the Bank of England would cushion the impact.

However, house building shares were lower, with Berkeley Group down 3% and Barratt Developments off by 2%. A note last month from analysts at Credit Suisses suggested a fall in immigration as a result of Brexit could cut housing demand.

Meanwhile a snap poll for the Institute of Directors on Monday revealed that six in ten business leaders plan to vote to remain in the EU following the agreement reached by Mr Cameron in Brussels on Friday.

Company directors believed the Prime Minister had secured a "reasonable deal" – with measures to reduce red tape, confirm that Britain would not be pulled into an "ever closer union" and protect the UK's financial services industry – the IoD said.

IoD director general Simon Walker said business leaders had concerns about the way the EU operates but this was balanced against the ability to trade easily across the single market.

He added that a worrying finding of the poll was that four in ten firms had not discussed the referendum in the boardroom.

Mr Walker said: "Amidst all the rhetoric and campaigning, it is vital that people appreciate the consequences for jobs, prices and economic growth.

"They need to hear what companies think.

"Business leaders will take different positions, but they should not be afraid to stand up.

"This referendum is a momentous political choice.

"Let us make sure it is a well-informed one."

Manufacturers' organisation EEF found 61% of its members supported continued membership. Firms said staying in the single market made exporting easier though companies also cited disadvantages to membership such as red tape.

EEF chief executive Terry Scuoler said: "These findings show that the majority of our members – of all sizes – are pragmatically pro-EU.

"There are no rose-tinted spectacles here – our members are fully aware of the pros and cons of EU membership and, on balance, have decided that the UK’s interests are best served by remaining."