Tuesday

23rd Jul 2019

Column / Brexit Briefing

Sterling crisis reflects May’s dilemma

  • The pound has hit a 30 year low against the US dollar, while plunging towards parity with the euro. (Photo: rednuht)

It’s a hectic time to be a currency trader, especially if you're betting against sterling.

The turmoil on the markets - the pound hitting a 30 year low against the US dollar, while plunging towards parity with the euro - kicked off during last week's Conservative party conference.

Read and decide

Join EUobserver today

Support quality EU news

Get instant access to all articles — and 18 year's of archives. 30 days free trial.

... or join as a group

  • Can Britain have its cake and eat it too on immigration and the single market? (Photo: Chris Barber)

Normally a currency crisis prompts decisive reaction from government; but from this, despite the pound losing 20 percent of its value against the dollar, and 15 percent against the euro since June, there is a silver lining.

The FTSE share index actually hit a record high this week, as multinationals doing business in dollars reaping the dividends of a weak pound and enjoying a large boost in their share price.

The value of most pension funds are linked to that of the stock market, so many Britons are temporarily better off, although a holiday to the Algarve or Spanish island to escape the bleak mid-winter seems suddenly a lot more expensive.

That still means that the buoyant stock market index is itself the product of post-Brexit fragility, rather than strapping economic strength. There’s also no question that confusion from the direction of the government’s Brexit talks has spooked the markets.

Brexit or Betrayal

Theresa May’s ministers know that in political terms the referendum result points only in the direction of a ‘hard Brexit’. In order to satisfy the will of the 52 percent, immigration control must take priority over single market membership. To them anything smacks of betrayal.

However, pursuing this can only intensify market turmoil, leading to more panic from financial services firms, many of whom are clear that they will move, at the very least, a small portion of their business to the eurozone if the UK loses the ‘passporting’ rights that allow firms to offer their services across the EU from headquarters in London.

So ministers are persisting with the strategy of hedging their bets, insisting the sterling crash is nothing to worry about, simply part of a little Brexit-related uncertainty.

"We go into this period of turbulence fundamentally strong," Chancellor Philip Hammond said this week.

'A brave new world'

But beyond the confident facade, the government is fragile. Brexit secretary David Davis, and International Trade minister Liam Fox, also a leading Leave campaigner, know the dilemma of immigration control vs single market is probably irreconcilable.

Maintaining the pretence that the two wishes can be satisfied is causing confusion and division.

Plans announced at a conference by Home Secretary Amber Rudd, that businesses would have to disclose how many foreign workers they employed was almost immediately abandoned following a backlash from the business community and other ministers, but not before Fraser Nelson, editor of the right-wing Spectator magazine, suggested that ‘Remainers’ like Rudd are damaging Britain’s reputation as a liberal country.

The status of EU nationals in the UK will be unchanged "absolutely, 100 percent", according to Brexit minister David Davis. Other ministers say that is dependent on reciprocal treatment of UK citizens by other EU governments.

For their part, representatives of the financial sector are clinging to the relative security of the proposed Repeal Bill announced by Theresa May last week.

Certainty needed in an uncertain time

Despite its name, the Repeal bill effectively means no change until the UK changes its own laws. "Any change will be at our own pace", said Emma Nicholson, a former Conservative and Liberal Democrat MEP, told a meeting of financiers last week in a bid to reassure them.

Yet this still leaves uncertainty, EU law doesn’t begin and end with directives and regulations. Implementing measures and technical standards are just as important and businesses still have no answers from government on how these will be affected.

"It’s a brave new world, but you need to be brave to live in it", whispered an aide at the Conservative party conference in Birmingham last week.

In the six month phoney war before Article 50 is finally triggered in March, the May government’s stance of hedging its bets is understandable.

But the sterling sell-off shows businesses see which way the wind is blowing, Britain will probably leave the single market.

Yet there is still no map, or path, towards a new destination, and the longer ministers try to face both ways, the greater the confusion.

At some point, Theresa May must demonstrate her bravery.

Disclaimer

The views expressed in this opinion piece are the author's, not those of EUobserver.

Pound plunges after UK result, but no 'panic'

"We are not in panic mode”, Germany's Commerzbank said. Bank of England chief said "we were well-prepared for this" and that British banks could weather the storm.

Tusk warns UK on harsh realities of Brexit

EU Council chief Donald Tusk told London there will be no winners from Brexit, and no compromise on freedom of movement, yet held out an olive branch for the future.

British ministers take aim at EU migrants

UK ministers spoke of hiring “British citizens first” and of deporting “EU criminals” on the third day of a Tory party conference in Birmingham.

News in Brief

  1. Agriculture MEPs elect far-right vice-chair
  2. Johnson is next British prime minister
  3. Johnson set to be announced British PM on Tuesday
  4. UK-based owners of .eu domains could keep name
  5. Weyand: EU would respond to US tariffs on cars
  6. UK foreign office minister quits ahead of Johnson as PM
  7. AKK to boost Bundeswehr budget to Nato target
  8. Police arrest 25 after Polish LGBT-march attack

Six takeaways on digital disinformation at EU elections

For example, Germany's primetime TV news reported that 47 percent of political social media discussions were related to the extreme-right AfD party, when in fact this was the case only for Twitter - used by only four percent of Germans.

Stakeholders' Highlights

  1. UNESDAUNESDA reduces added sugars 11.9% between 2015-2017
  2. International Partnership for Human RightsEU-Uzbekistan Human Rights Dialogue: EU to raise key fundamental rights issues
  3. Nordic Council of MinistersNo evidence that social media are harmful to young people
  4. Nordic Council of MinistersCanada to host the joint Nordic cultural initiative 2021
  5. Vote for the EU Sutainable Energy AwardsCast your vote for your favourite EUSEW Award finalist. You choose the winner of 2019 Citizen’s Award.
  6. Nordic Council of MinistersEducation gets refugees into work
  7. Counter BalanceSign the petition to help reform the EU’s Bank
  8. UNICEFChild rights organisations encourage candidates for EU elections to become Child Rights Champions
  9. UNESDAUNESDA Outlines 2019-2024 Aspirations: Sustainability, Responsibility, Competitiveness
  10. Counter BalanceRecord citizens’ input to EU bank’s consultation calls on EIB to abandon fossil fuels
  11. International Partnership for Human RightsAnnual EU-Turkmenistan Human Rights Dialogue takes place in Ashgabat
  12. Nordic Council of MinistersNew campaign: spot, capture and share Traces of North

Latest News

  1. Macron: 14 EU states agree on a migration 'mechanism'
  2. As Johnson set to become PM, ministers pledge to resign
  3. Poland's PiS prepares 'failsafe' for October election
  4. Abortion Wars
  5. EU goes on holiday as new UK PM arrives This WEEK
  6. Survey: Half of EU staff 'don't know' ethics rules
  7. Von der Leyen signals soft touch on migrants, rule of law
  8. Timmermans: von der Leyen will be tough on rule of law

Stakeholders' Highlights

  1. Nordic Council of MinistersLeading Nordic candidates go head-to-head in EU election debate
  2. Nordic Council of MinistersNew Secretary General: Nordic co-operation must benefit everybody
  3. Platform for Peace and JusticeMEP Kati Piri: “Our red line on Turkey has been crossed”
  4. UNICEF2018 deadliest year yet for children in Syria as war enters 9th year
  5. Nordic Council of MinistersNordic commitment to driving global gender equality
  6. International Partnership for Human RightsMeet your defender: Rasul Jafarov leading human rights defender from Azerbaijan
  7. UNICEFUNICEF Hosts MEPs in Jordan Ahead of Brussels Conference on the Future of Syria
  8. Nordic Council of MinistersNordic talks on parental leave at the UN
  9. International Partnership for Human RightsTrial of Chechen prisoner of conscience and human rights activist Oyub Titiev continues.
  10. Nordic Council of MinistersNordic food policy inspires India to be a sustainable superpower
  11. Nordic Council of MinistersMilestone for Nordic-Baltic e-ID
  12. Counter BalanceEU bank urged to free itself from fossil fuels and take climate leadership

Join EUobserver

Support quality EU news

Join us