Now HSBC ‘talks down the pound’
THE country’s biggest bank was accused of ‘doing down the pound’ last night after it claimed sterling would collapse if Britain left the European Union.
HSBC became the latest pro-Brussels corporate giant to claim Brexit would be disastrous for the economy, warning the pound could sink to its lowest level since the 1980s.
It came as sterling fell against the US dollar to as low as $1.3879 – a level last seen in the recession seven years ago.
But Eurosceptics accused HSBC – which only last week said it would keep its headquarters in London even if Britain left the EU – of scaremongering.
‘Those who wish to remain in the EU at all costs should stop doing down the pound,’ said Matthew Elliott, chief executive of the Vote Leave group campaigning for Britain to quit the EU.
The bank’s chairman and chief executive were also criticised for signing a letter to The Times backing David Cameron’s deal with Brussels to keep Britain in the EU.
Leading fund manager Neil Woodford, who looks after more than £14billion of savers’ cash, said the 200 business leaders who put their name to the letter this week were wrong to claim that leaving the EU was a threat to jobs and growth.
‘There is no economic case either for the UK to stay in or to leave the EU,’ he added. ‘Any argument based on economics has no merit.’
The letter, backed by 36 FTSE 100 firms and organised by Downing Street, argued that leaving the EU ‘would put the economy at risk’ by deterring investment and threatening jobs.
But experts said the fall in the pound could turbo-charge the economy by making exports cheaper for foreign buyers, boosting British manufacturing.
Mr Woodford said: ‘If we leave the EU the impact on the UK stock market will be short-lived and sterling weakness may be beneficial. This is a much bigger deal for the EU than it is for us.’ Sterling has fallen 5.5 per cent against the dollar this year and nearly 12 per cent since the summer.
Analysts at HSBC said the pound could fall by another 20 per cent after Brexit, taking it to around $1.11. That would be its weakest point since 1985.
‘Following a vote to leave, we think uncertainty could grip the UK economy, triggering a potential slowdown and a collapse in sterling,’ said a report by HSBC’s chief UK economist Simon Wells and his colleagues.
The report said that as well as the pound falling, economic growth would be halved, with output rising by between 0.8 per cent and 1.3 per cent in 2017 rather than 2.3 per cent as currently forecast.
But it added: ‘Over time, Brexit could be beneficial if it allowed the UK to “cherry pick” immigrants from all over the world and forge new trading partnerships. Regardless of the outcome, the UK should remain a flexible and dynamic economy.’
Eurosceptic Tory MP Jacob Rees-Mogg said: ‘This is scaremongering… by all the same people who told us we should join the euro.
‘We could see a strong rebound if we do decide to leave. What markets like is certainty and a vote to leave would give us that certainty.’
Tom Becket, chief investment officer at the wealth management firm Psigma, said: ‘The one thing investors really don’t like is uncertainty and it seems like HSBC is freaking out a little bit.
‘Making strong predictions at this point is probably a mug’s game. Sterling could fall 20 per cent, but it could also go up 20 per cent – there is likely to be a lot of volatility in the lead up to the Brexit vote.
‘But weakness is not necessarily a bad thing. A weak pound is not really something to get upset about unless you’re planning on taking lots of foreign holidays.’