Consumers left reeling, pound plummets after EU vote

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