Wednesday 21 August 2019

Pound takes another hit amid warning that no-deal Brexit is a 'very real prospect'

Michael Gove (Yui Mok/PA)
Michael Gove (Yui Mok/PA)

David Chance

The pound tumbled against the euro and the dollar on Monday with the British cabinet set to hold its first high-level Brexit meeting and after Michael Gove, a top UK government official, warned that a no deal outcome was “a very real prospect”.

The beleaguered British currency fell by 0.3pc against the euro falling below the 90 pence level and was also lower against the dollar at $1.2340 after Gove’s comments, which were made in a Sunday Times article.

Gove’s comments were reinforced by new British Foreign Secretary Dominic Raab who said that Prime Minister Boris Johnson would not even reopen talks with the European Union on Brexit unless the backstop were changed.

“It is not just going to revert to where we left off the last negotiations. There must be some change from the EU. And if the EU are not willing to move at all, we must be willing to ready to give the country some finality,” he told BBC 4’s Today programme in an interview.

Reports in British media said Johnson was unwilling to embark on talks with the leaders of EU states until the backstop was withdrawn, and that his first meeting with them could take place on October 17 at an EU summit, just two weeks before the deadline for withdrawal from the bloc.

Investment bank ING warned that in the event of a no-deal Brexit, the pound could fall to parity with the euro. It put that scenario at 20pc likelihood, assigning 40pc likelihood to an early election which would see an extension to the withdrawal agreement.

The only poll taken since Johnson became prime minister showed the Conservatives in the lead with 28pc of the vote, according to Comres, up 3 percentage points, with those gains coming at the expense of Nigel Farage’s Brexit Party.

In the poll for the Sunday Express, Labour trailed the Conservatives by one percentage point.

A new study by credit risk assessment firm Credit Benchmark said that its credit risk indicator for Irish companies had started to deteriorate, likely as a result of Brexit as the UK and Belgium were the only EU countries that had seen a decline.

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