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Pound drops to lowest level in two years amid no-deal Brexit rhetoric Pound drops to lowest level in two years amid no-deal Brexit rhetoric
(about 4 hours later)
The pound has fallen to its lowest level for more than two years as investors react to the escalating no-deal rhetoric of Boris Johnson’s government. The pound has slumped to a 28-month low as investors react with concern to the escalation of no-deal rhetoric by Boris Johnson’s government.
Sterling slipped below $1.23 against the US dollar and fell sharply against the euro on the international currency markets on Monday, as cabinet ministers ramped up their warnings over a no-deal Brexit. Sterling dropped below $1.23 against the US dollar and fell sharply against the euro to below €1.10 on the international currency markets on Monday, as cabinet ministers ramped up their warnings over a no-deal Brexit.
The pound dropped more than 1% against the US currency to trade at about $1.2240 on the foreign exchanges, extending a slide under way over recent months as the chance of the UK crashing out of the EU at the end of October mounts. On the single currency the pound was down by about 0.8% to €1.1033. As the pound lurched downwards, an array of leading business groups lined up to voice exasperation that a lack of information from the government was hampering preparations for no-deal.
Echoing a warning from the Confederation of British Industry at the weekend that Britain stands ill-equipped, lobby groups representing firms employing millions of people across the country sounded the alarm.
The Federation of Small Businesses (FSB) said the lack of preparedness among its members was “frightening”, while the British Chambers of Commerce (BCC) said industry’s questions about how to prepare had “gone unanswered”.
The Institute of Directors (IoD) said guidance from government had been “partial” and was yet to be properly road tested.
The pound fell by more than 1.3% against the US currency to trade at about $1.2216 to the lowest since , extending a slide under way over recent months as the chance of the UK crashing out of the EU at the end of October mounts. The pound was down by a similar amount against the single currency at €1.0965.
Analysts said comments from senior figures in Johnson’s cabinet had rocked the City, including a suggestion from Dominic Raab on Monday morning that the UK would be in a better place to negotiate a good deal with the EU after no-deal Brexit.Analysts said comments from senior figures in Johnson’s cabinet had rocked the City, including a suggestion from Dominic Raab on Monday morning that the UK would be in a better place to negotiate a good deal with the EU after no-deal Brexit.
The foreign secretary told BBC Radio 4’s Today programme that the EU’s “stubborn” behaviour would be responsible if the UK left without an agreement with Brussels at the end of October.The foreign secretary told BBC Radio 4’s Today programme that the EU’s “stubborn” behaviour would be responsible if the UK left without an agreement with Brussels at the end of October.
Petr Krpata of the City bank ING said: “The market [is] awaking to the reality of a new UK government, its rather combative stance on the current EU-UK Brexit deal, and its open remarks on the rising probability of a no-deal Brexit.”
Over the weekend, several key figures in Johnson’s government said the prime minister was “turbo-charging” preparations for no deal. Michael Gove, the new cabinet minister in charge of planning for such a scenario, said the government was operating on the assumption of leaving without a deal.Over the weekend, several key figures in Johnson’s government said the prime minister was “turbo-charging” preparations for no deal. Michael Gove, the new cabinet minister in charge of planning for such a scenario, said the government was operating on the assumption of leaving without a deal.
Hitting holidaymakers in the pocket as they head abroad during the school holidays, the pound has sunk by more than 10 cents against the dollar from a peak in excess of $1.33 in March. Against the euro it has fallen by more than 7 cents from a high of €1.17 recorded in May.Hitting holidaymakers in the pocket as they head abroad during the school holidays, the pound has sunk by more than 10 cents against the dollar from a peak in excess of $1.33 in March. Against the euro it has fallen by more than 7 cents from a high of €1.17 recorded in May.
Even though Johnson’s stated aim is to avoid a no-deal outcome, leaving without one is viewed by investors, as well as ministers, as an increasingly likely prospect. The EU has maintained its stance that the withdrawal agreement negotiated with Theresa May will not change and is the best and only deal possible. The BCC, which represents 75,000 businesses employing 6 million people, called on the government to “up the ante” on no-deal preparations.
The FTSE 100 rose sharply as the currency headed in the other direction, gaining by almost 1.9% to stand at 7,690 in early afternoon trading. When the pound drops, the FTSE tends to rise as companies in the blue-chip index tend to make most of their earnings in foreign currencies such as the dollar. “The 31st October deadline is fast approaching and businesses are being told to prepare for no deal, but there are still significant areas where there is simply little basis on which to plan,” said Claire Walker, co-executive director of the BCC.
“Business communities want the government to make every effort to avoid no deal, but at the same time, urgently need it to up the ante on its planning to enable firms to prepare for all scenarios.”
The FSB urged the government to “put its money where its mouth is” by handing £3,000 “Brexit vouchers” to small firms that trade overseas, to help them pay for advice on navigating custom and tariffs.
Edwin Morgan, interim director general of the IoD, also called for firms to be issued with Brexit vouchers and criticised the lack of detail from government.
“We have long urged our members to make any preparations they can for no deal, but many smaller firms simply haven’t had the time or money to spend on getting ready for something that has not been, and still isn’t, government policy,” he said.
Make UK, the trade body for manufacturers, said many firms had already spent money preparing for the original Brexit date in March and might now struggle to raise more cash.
“Warehousing costs have increased enormously and October is a time when capacity is already pre-booked by retailers for Christmas,” said Ben Fletcher, executive director of communications, government and policy.
“It’s going to be more expensive for businesses that struggled to prepare in the spring.”
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