On Sunday night into Monday, the pound fell to its lowest price against the Euro in 10 years. The pound plunged to 93.26p against the Euro, the lowest level since 2009 – apart from a flash crash in October 2016. Forex strategist at Bank of America Kamal Sharma said that “a significant compression of UK (debt) yields and Brexit undertones” are why Sterling dropped against the Euro.
Ireland’s position on the withdrawal agreement being that it would not renegotiate the highly-contested backstop, also weakened the pound according to analysts.
Nigel Green, Founder and chief executive of deVere Group, said the economic impact over Brexit is growing, as the likelihoods of a snap-election or a no-deal Brexit grow.
Mr Green told Express.co.uk: “Sterling has taken another pounding after the UK’s economy was shown to have contracted in the second quarter, adding to the economic woes on top of no-deal Brexit concerns.
“The pound has fallen more than 4.5 per cent against the dollar in July and August over fears Boris Johnson’s government is pushing the country towards a no-deal Brexit –which most economists think would be economically damaging.
“Should the UK leave with no-deal, the pound is likely to remain weak for several years until the country and the EU readjusts.”
Should a vote of no-confidence trigger a general election, the arrival of Labour leader Jeremy Corbyn would not appease the economy.
Mr Green explained: “There is growing speculation too that there will be a general election in the autumn and this will add to the uncertainty for the pound and Britain’s economy.
“The situation will get even more serious should a Jeremy Corbyn-led Labour government win that election.
“His high tax and low-profit policies and anti-business rhetoric would deliver a hammer blow to the already floundering economy.”
The Bank of England has also warned a no-deal Brexit could devalue the pound, cutting its official projection for GDP growth this year from 1.5 percent to 1.3 percent in its August inflation report.
For 2020 the official projection for GDP growth has been cut from 1.6 percent to 1.3 percent.
On top of this, a poll of more than 740 clients carried out by deVere Group fond that six out of 10 investors are now actively seeking to move assets out of Britain.
Mr Green said: “There is a legitimate and growing sense amongst those who were polled that in order to build and safeguard wealth, assets should be moved outside of the UK.”
He added: “Investors are seeing a perfect storm brewing: the UK’s slowing economy, weak global economic growth, the pound at a 10 year low, the increasing possibility of an interest rate cut and the risk of a no-deal Brexit pushing the UK into a recession.”
“The poll underscores that the UK is no longer an attractive place for investors.
“The UK is now at a critical point – perhaps the most critical since the global crash.
“Many are simply not prepared to risk their wealth and are considering international options.”
The chance of a general election this year is just 4/11 according to bookmakers Ladbrokes.
Alex Apati of Ladbrokes said: “It’s now looking more a case of when, not if, a general election is called before the year is out.”
Year of Next general election
- 2019 – 4/11
- 2020 – 3/1
- 2021 – 20/1
- 2022+ – 16/1
Month of Next general election
- September – 100/1
- October – 3/1
- November – 6/4
- December – 8/1
- 2020 or later – 2/1
Published at Wed, 14 Aug 2019 05:00:00 +0000