While the eyes of the world focus on Greece's debt crisis, investors in Edinburgh are busy preparing for Britain to be next.

Turcan Connell, which caters to rich families, expects sterling to lose between 20% and 30% against the dollar once investors turn their sights on Britain as the government sells a record amount of debt.

"Alarm bells were ringing in Greece for a long time and when it happened, it happened very quickly," said Haig Bathgate, head of strategy at Turcan Connell. "The UK is in a similar predicament. It could be hit very hard."

Money managers in Edinburgh are manoeuvring to protect assets from the UK economy as it limps out of its worst recession on record.

Bruce Stout, of Murray International Trust in Edinburgh, said the chance of a plummeting pound are "better than even" and his biggest holdings are in Asia and Latin America. He called sterling a "very vulnerable currency".

British fund managers at Aegon Asset Management and Scottish Widows Investment Partnership, together responsible for more than £30bn, said in January they are buying companies that do the bulk of their business abroad.

"When there's a fiscal crisis, the markets tend to punish that country very quickly," said Bathgate. "I don't think Britain is in nearly as bad a position as Greece. We've got a good taxation system. However the position of the economy is very dire."

The UK's budget deficit is roughly the same as Greece's, both exceeding 12% of economic output. Both Moody's and Standard & Poor's said last week they may cut Greece's credit rating as the five-month-old government struggles to curb spending and control its debt. Concern that Greece won't be able to cut its deficit sent the euro 5.6% lower against the dollar this year.

British prime minister Gordon Brown's government in December increased its planned gilt sales for the financial year ending this month to a record £225.1bn and Moody's Investors Service said in December the UK may "test the AAA boundaries".

Brown must call an election by June and some polls signal that no party will emerge with a clear majority. A hung parliament, or signs that economic growth isn't recovering as expected, might be the catalysts for the pound to accelerate declines, Bathgate said.

"There could be a number of triggers," he said. "If there's indecision about how you deal with a problem, that's when things fall apart. We could be in the position where the spotlight turns to the UK."

The pound may come under more pressure with the Bank of England resuming its quantitative easing programme, a process of injecting new money into the economy, within the next three to four months, Bathgate said.

"If it comes back then we're likely to be the only people doing that in the world at that time," said Bathgate. "My strong view is the government is trying to create inflation and devalue the currency."

Bathgate said he sold conventional UK government-bond investments at the end of 2008 and holds only index-linked securities because of inflation concerns. The firm also has reduced holdings in corporate bonds because of the potential impact of a decline in government securities.

Bloomberg