Pound falls as confidence hit
THE pound kept sliding as concerns over UK economic outlook intensified after a collapse in business confidence following the general election, yesterday.
Sterling hit a two-month low against the US dollar at $1.264 and sank to its lowest against the euro at €1.128 since last November amid fears that uncertainty over Brexit could deter companies from making investment decisions.
Ratings agency Moody’s warned that the inconclusive election result would hamper Brexit talks and damage Britain’s credit outlook, potentially making it more difficult to raise money.
The first poll of business leaders since the election, among nearly 700 members of the Institute of Directors, revealed a “dramatic” drop in confidence, with directors seeing no clear way to quickly resolve the political situation.
They urged a quick agreement with the European Union on transitional arrangements for Brexit and clarity on the status of EU workers in the UK, adding that the priority for the new Government must be reaching a trade deal with the EU.
IoD director general Stephen Martin, pictured, said: “It is hard to overstate what a dramatic impact the current political uncertainty is having on business leaders, and the consequences could, if not addressed immediately, be disastrous. The needs of business and discussion of the economy were largely absent from the campaign. The last thing business needs is a parliament in paralysis, and the consequences for businesses and for the UK as an investment destination would be severe.” The survey showed a negative 34-point swing in confidence in the UK economy from its survey in May, with 20 per cent optimistic over prospects for the net 12 months against 57 per cent who are quite or very pessimistic. This compared with 34 per cent optimistic and 37 pessimistic last month.
The manufacturers’ organisation EEF today urged the Government to rethink its Brexit strategy and put single market access and a form of customs union at the heart of its negotiating strategy. Its chief executive, Terry Scuoler, said: “With less than two years to negotiate a meaningful deal, the Government should commit to a significant period of transition to manage uncertainty for businesses and bolster confidence. Business groups can help with the negotiations over trade, which is the model every other Government operates.”