The pound's sharp decline in the four months since Britain's referendum on the European Union has acted like a "shock absorber" for the British economy, the Bank of England deputy governor Ben Broadbent said.

Sterling has plunged almost 20% since Britain voted in favour of leaving the 28-country union in June and has lost over 6% in the last two weeks after Prime Minister Theresa May floated the prospect of a "hard Brexit". By mid afternoon on Monday (17 October), the UK currency was down 0.48% against the euro, exchanging hands at €1.1047, and was 0.30% lower against the dollar, trading at $1.2150.

However, Broadbent said that having a flexible currency was "extremely important" to cope with economic shocks.

"In the shape of the referendum, we've had exactly one of those shocks," he told BBC Radio 5 Live, adding that Britain's central bank would not intervene to rescue the pound.

"Having a flexible currency is an extremely important thing especially in an environment when your economy faces a shock that is different to your trading partners."

Allowing the pound to react "is a very important shock absorber".

Broadbent's comments came as rising gilt yields compounded the pound's woes, with the 10-year UK gilt climbing to 1.17%, trading near its highest since the June referendum.

Earlier in the day, a survey released by the EY Item Club warned that Britain is facing four years of subdued economic growth as it negotiates to extricate itself from the EU. The think tank said it expects the economy to expand 1.9% this year, in line with its July forecast, but predicts growth to slow to just 0.8% in 2017.

Consumers' pockets are expected to take a hit over the coming months as the weak pound pushes inflation up to 2.6% next year, the report added.