Pound sinks as City says No Deal will cost £36bn

BANK of England governor Andrew Bailey insisted he had full confidence in post-Brexit Britain yesterday as the pound slumped and analysts warned No Deal could wipe £3 billion off the value of top firms.

He said the financial system was in a strong position and suggested British banks could cope.

But as another day went by with EU talks still deadlocked, some in the financial industry began to get cold feet. Sterling fell to 1.091 against the euro – a near three-month low – and 0. per cent against the dollar to close at 1.321.

Banking giant Morgan Stanley predicted that No Deal would wipe to 10 per cent off the value of companies on the FTSE 250 index, reducing their value by around £3 billion. ‘The longer-term ramifications are unclear and complex,’ warned spokesman Graham Secker.

Experts at Capital Economics are more pessimistic. They think sterling could fall to as low of 0.92 against the euro with no trade deal, pushing the pound below the euro for the first time.

But as the Bank of England released its Financial Stability Report yesterday, Mr Bailey said: ‘The UK banking system remains resilient to a wide range of possible economic outcomes. It has the capacity to continue to support households and businesses even if those outcomes are considerably worse than currently expected.’

He admitted, however, there was a limit to what could be done to minimise disruption. While the Bank of England has been preparing for years to make sure UK companies and citizens can access financial services on the continent from next year, the EU has not reciprocated.

This means British expats living in the EU may face trouble accessing their UK bank accounts.