Con­sumers left reel­ing, pound plum­mets af­ter EU vote

Weekend Argus (Saturday Edition) - - LIFE -

LON­DON: Bri­tish con­sumer con­fi­dence has suf­fered one of its big­gest drops in 21 years and the coun­try’s largest de­part­ment store ex­pressed con­cern over the pound’s fall, in the strong­est ev­i­dence to date of the chal­lenges Bri­tain’s econ­omy faces af­ter the Brexit vote.

The vote to leave the EU has thrust Bri­tain into its worst po­lit­i­cal cri­sis in modern times. In­vestors have warned that what was ranked as the world’s fifth largest econ­omy faces years of un­cer­tainty over ev­ery­thing from trade to in­vest­ment.

In a spe­cial post-ref­er­en­dum sur­vey pub­lished yes­ter­day, mar­ket re­search com­pany GfK said con­sumer con­fi­dence fell 8 points to -9 in the af­ter­math of the June 23 vote from -1 in its which dates back to 1974, fell so steeply was in Jan­uary 2011, and the last time it fell more was in De­cem­ber 1994.

Moody’s credit rat­ing agency said yes­ter­day Bri­tain faced a shock to con­fi­dence and al­most halved its UK growth fore­cast for next year to 1.2 per­cent from 2.1 per­cent. Moody’s also cau­tioned that the Brexit vote could po­ten­tially threaten the ex­is­tence of the EU.

“The po­ten­tial strength­en­ing of na­tion­al­is­tic and pro­tec­tion­ist move­ments could have a detri­men­tal ef­fect on the EU, even threat­en­ing its ex­is­tence,” the credit rat­ing agency said.

It ex­pected global spillovers to be lim­ited, how­ever.

With house­holds and in­vestors left guess­ing about what the fu­ture re­la­tion­ship with the EU will look like, ster­ling has suf­fered its worst three- week per­for­mance against the US dol­lar since 1992 when Bri­tain crashed out of the pre- euro Ex­change Rate Mech­a­nism.

Ster­ling dipped un­der $1.30 this week the first time since 1985.

It was trad­ing as high as $1.50 just hours af­ter vot­ing ended in the ref­er­en­dum.

Amid the tur­moil, Bank of Eng­land Gov­er­nor Mark Car­ney said on June 30 the cen­tral bank would prob­a­bly need to pump more stim­u­lus into Bri­tain’s econ­omy over the com­ing months.

The bank’s rate set­ting com­mit­tee is due to make its monthly pol­icy an­nounce­ment on Thursday. – Reuters

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