The London Stock Exchange Group's planned $20 billion merger with Deutsche Börse is at risk of collapse after the UK's decision to leave the EU dramatically reframed the terms of the deal, according to sources.

Executives on both sides fear the UK vote will put overwhelming pressure on German watchdogs to block the deal because the combined company will be based in London, according to the people.

“This deal is dead. The Germans won’t allow it,” said one disconsolate backer of the transaction.

However, both companies said on Friday they were committed to the deal’s agreed and binding terms, irrespective of the vote. The outcome did not affect the “compelling strategic rationale” of their deal, they said in a joint statement.

The Irish Stock Exchange uses Deutsche Boerse's Xetra trading infrastructure for the Irish market

A combination of Europe’s two largest exchange operators by market capitalisation would create a derivatives and securities trading powerhouse able to take on the world’s largest markets operators.

In spite of efforts to press on with the deal, politicians in Germany have frequently expressed concern that oversight of part of their critical market infrastructure could be headquartered outside the EU.

Michael Fuchs, from Angela Merkel's ruling CDU party said that there was "no way" the merger could go ahead with the headquarters in London.

"The headquarters has to be in Frankfurt — and then maybe there can be a secondary centre in London. Brexit will affect the city as a financial centre. We can't just pretend nothing has changed," he said.

Investors’ uncertainty over the deal’s future helped push LSE shares down 8.5 per cent to £24.98, while Deutsche Börse shares dropped 5.1 per cent. Analysts also noted the deal’s valuation had changed because the LSE reports earnings in sterling, which lost about 10 per cent in value overnight.

Under the all-share deal, LSE shareholders would own 45.6 per cent of the combined group while Deutsche Börse shareholders would own 54.4 per cent.