BRITONS should not underestimate the economic impact a Greek exit from the eurozone would have on the UK, George Osborne has warned, as Brussels upped the stakes by telling Athens Sunday's referendum was a vote on whether Greece wanted to keep the euro or return to the drachma.

Markets across Europe and Asia tumbled at the prospect of a "Grexit" and the uncertain knock-on effects on the eurozone and the EU in general.

Jean-Claude Juncker, President of the European Commission, made a direct appeal to Greek voters against voting No in the forthcoming poll, urging them "not to commit suicide for fear of death".

After a Whitehall emergency meeting involving senior UK Government Ministers and Mark Carney, the Governor of the Bank of England, the Chancellor delivered a Commons statement in which he told MPs: "We hope for the best but we prepare for the worst."

Admitting there was much uncertainty about what happened next, he explained: "This Greek crisis has in one form or another been with us for five years, it is one of the biggest external economic risks to the British economy and the situation today shows that these risks remain.

"I don't think anyone should underestimate the impact a Greek exit from the euro would have on the European economy and the knock-on effects on us. That is why I have consistently argued that the best way to protect ourselves from these risks is to get our own house in order."

MPs were assured the 6000 or so British residents in Greece, out of a total of 40,000, who received pension payments from the UK Government should be protected from the cash withdrawal and international payment restrictions imposed on Greek banks.

But Mr Osborne admitted the situation remained fast-moving and uncertain and the Treasury would keep matters under constant review.

"I have asked the Department for Work and Pensions and public service pension administrators to attempt to contact people that draw a British state and public sector pension from a Greek bank account. These people will be helped to switch their payments to a non-Greek bank account if they wish."

The Chancellor added: "So let me be clear; British pensioners are being paid as normal, British businesses trading with Greece will be supported and British holidaymakers will receive the advice and the help that they need. In a rapidly changing situation, I want people to know that Britain is prepared."

Chris Leslie for Labour said British exporters, pension funds and the one million visitors to Greece each year needed to know the Government had a "thorough contingency plan".

With the £1.1 billion IMF loan due to be repaid by Greece by midnight, Stewart Hosie, the SNP's deputy leader, noted how the international finance watchdog had "some leeway" as to when it declared a repayment had been missed.

He said: "Does that not provide some flexibility to ensure that a deal can be reached and provide a strong incentive for discussions continuing beyond Tuesday, not withstanding the forthcoming Greek referendum?"

Mr Osborne said he did not want to prejudge the decisions of the IMF but argued space for substantive negotiations before the referendum was "pretty limited".

He added: "Of course, we will see what the outcome of the referendum is."

While Angela Merkel warned Athens it could not expect more eurozone concessions on pensions and VAT, the German Chancellor nonetheless said if Greeks voted Yes in Sunday's referendum, then new bail-out talks could start to prevent a Grexit.

Meantime, Mr Juncker made clear: "If they vote No, it would be disastrous for the future. No would mean...they are saying No to Europe."

But Alexis Tsipras, the Greek premier, believes a No vote is not about euro membership but, rather, would enable Athens to broker a better bail-out deal.

Some 12,000 people gathered outside the parliament last night, calling for a No vote. One banner said: "Our lives do not belong to the creditors."