Newspaper article The Evening Standard (London, England)

Sound as a Pound? Not This Year, Thanks to Brexit; ECONOMIC ANALYSIS

Newspaper article The Evening Standard (London, England)

Sound as a Pound? Not This Year, Thanks to Brexit; ECONOMIC ANALYSIS

Article excerpt

Byline: Russell Lynch

IT ALWAYS pays to take growth figures with a pinch of salt, but today's were even less relevant than usual when it comes to assessing the actual health of the UK economy.

A revision-prone and backwardlooking glance at GDP 0.5% in the last quarter generates headlines but there's a more important indicator of prospects to be looking at this week; namely the collapse of sterling.

Since November's Bank of England inflation report, the pound has been sinking faster than most of the pundits' 2016 share tips, down almost 7% in trade-weighted terms. In fact, barring the immediate aftermath of the financial crisis, it's the biggest such fall over a two-month period for 20 years, according to UBS.

That, of course, isn't great news for any of us who were getting used to a euro above [euro]1.40 it's now closer to [euro]1.30 and seeing our pounds buy more than $1.60 in the US. Thank Federal Reserve chair Janet Yellen, who raised US rates, and European Central Bank president Mario Draghi for that. According to financial markets, a first interest-rate rise from the Bank of England isn't fully priced in until an incredible November 2017 more than a decade after the last hike.

Given that the UK should still manage growth in the region of 2% this year, sterling's fall, though welcome, feels like an over-reaction not that our manufacturers will care. For them, it's a godsend, underlined by the virtually nonexistent growth we saw from them today. They spent most of the year going backwards after that "march of the makers" promised by George Osborne in 2011 hit the quicksand.

Their unlikely saviour for a crumbling pound is David Cameron and the Brexit referendum. The Bank's Governor, Mark Carney, also helped this week, talking up the "risk premia" potentially attached to UK assets as a result of a Brexit, and the dangers of relying on the "kindness of strangers" to fund a (slowly improving) current account deficit. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.