A looming referendum on whether Britain should leave the European Union has shaken confidence in the pound sterling. The Financial Times reported Sunday the sterling bond market has not yet opened this year, with "Brexit" fears feeding into worries about the U.K. currency's overall decline.

Some investors are now holding off putting money into the U.K. until the outcome of the long-running debate becomes clearer. A YouGov poll conducted at the end of December indicated the two sides are neck-and-neck, with "leave" at 42 percent and "remain" at 41 percent. Matthew Beesley, head of global equities at Henderson, told the FT the risk of Brexit has left the British economy "in limbo." 

An in-or-out referendum was a core campaign promise of the Conservative Party before the May 2015 general election, an election in which the party gained an unexpected majority. Prime Minister David Cameron pledged to hold the vote before the end of 2017, although speculation is mounting that it could take place as soon as this summer.

It's not just Brexit that has hit the bond markets. The price of borrowing in sterling has also raised concerns. The euro market, with comparatively low interest rates, has risen since 2012 while the sterling bond market has dropped.

“The sterling market has been suffering a slow death for years,” Jim Leaviss, head of fixed interest at M&G Investments, told the FT. “Brexit will probably not help as it will create uncertainty.”

The long-term effects of Brexit are debatable. "I have to say I think it [London] would continue to thrive outside the union, though I think there will inevitably be some challenges in the event it was to leave,” Mark Astaire, vice chairman of investment banking at Barclays, told The Telegraph Wednesday. Astaire said in the event of withdrawal, he did not believe London would lose its place as Europe's leading financial center in the coming decade.