Brexit weighs on small business customers
Pound slumps to lowest since 2017 as no-deal Brexit risk flares
Brexit is weighing heavily on the minds of Irish small and medium enterprise customers, the chief executive of the Bank of Ireland said on Monday. Listening to the emotional rhetoric out of London, it is pointing in the direction of a no-deal Brexit being a real risk, Francesca McDonagh said in an interview. Our advice to business owners is to speak to us to be as ready as they can be for what will be an uncertain period.
The day after the British government signaled a ramping-up of preparations to leave the European Union without an agreement, two reports have called into question the readiness for a no-deal Brexit. The employers’ organisation the Confederation for British Industry (CBI) says that after analyzing plans by the UK government, the EU Commission and member states, as well as businesses, it has concluded that no one is ready for no deal.
Meanwhile the Institute for Government warns that a no-deal Brexit will not be a clean break from the EU but will dominate government for years to come. On Sunday the minister responsible for no-deal planning, Michael Gove, wrote that the government was now working on the assumption that the EU would not renegotiate its Brexit deal which meant that the UK had to be ready to leave without one. Planning for no-deal is now this government’s no.1 priority, Gove said, adding that every penny needed for preparations would be made available.
Finance minister Sajid Javid has also said he would soon announce significant extra funding for no-deal planning. Meanwhile, the pound slid to its lowest level in more than two years and gilts rallied as UK Prime Minister Boris Johnson stepped up preparations for a no-deal Brexit with just about three months left until the nation exits the European Union.
Sterling fell against all of its Group-of-10 peers as various members of Johnson’s top team took a tough stance, with Chancellor Sajid Javid saying he was stepping up Treasury preparations for a no-deal departure and top aide Michael Gove writing in the Sunday Times that the government was now working on the assumption the talks with the EU would fail.
The pound is back on the defensive after a short-lived relief rally following the appointment of Boris Johnson as the new prime minister, said Lee Hardman, a currency analyst at MUFG. The promotion of hard Brexiteers to key cabinet positions is consistent with a government that will press hard to deliver Brexit at the end of October with or without a deal.
Sterling is the worst performer in the Group-of-10 currencies this month as investors brace themselves for the risk of both a no-deal Brexit and a general election. Morgan Stanley sees the pound falling to as low as parity with the dollar under a no-deal Brexit scenario.
The new British premier has set up cabinet groups to prepare for a no-deal Brexit and is expected to speak to more European leaders over the coming days. Sterling slid 0.7 per cent to $1.2292 in London, the lowest level since March 2017. It weakened 0.7 per cent to 90.47 pence per euro. The yield on UK 10-year government bonds fell four basis points to 0.65 per cent.