Business dismayed as Brexit chaos erupts
Pound tumbles over shock blows to May’s leadership
Businesses have reacted with dismay to the news of two cabinet ministers resigning over Brexit, just after the pound showed signs of recovery on hopes that the Chequers deal might safeguard business interests.
Parcel export firm ParcelHero said the Brexit chaos is “more nerve-wracking than the World Cup”.
The firm said: “We’d rather watch England take penalties in the World Cup final than see Britain go into the final round of Brexit negotiations so disunified.
“Supporters of a soft Brexit cheered on Theresa May’s victory over hard Brexiteers; only to see an own goal by Brexit Secretary David Davis followed by an opportunist move by Foreign Secretary Boris Johnson, potentially reversing an excellent result.”
Mr Davis’s resignation was largely ignored by markets.
After an initial fall on the news, the pound recovered as markets took on board the news that he is being replaced by Brexiter Dominic Raab.
Sterling had been riding high earlier in the session after Mr Davis resigned, with traders interpreting his departure as increasing the chances of a soft Brexit.
However, markets turned less sanguine when Mr Johnson also announced his resignation, which sent the pound tumbling as it plunges Mrs May into a fresh leadership crisis.
Helal Miah, analyst at The Share Centre, said: “The news of David Davis’ resignation as Brexit Secretary led to sterling strengthening as it seemed that things would tilt towards a softer Brexit.
“However, as a result of Boris Johnson this afternoon quitting his role as Foreign Secretary in reaction to the ongoing negotiations, the Prime Minister’s position has become all the more weak, which has sent sterling to reverse the gains of this morning. The events of the last 24 hours have greatly increased the fears for businesses and investors which justifies sterling’s fall.”
Connor Campbell, financial analyst at SpreadEx, said: “With that being two Cabinet resignations in less than 24 hours, the pound began to fret about the chances of a formal challenge to Theresa May’s leadership from inside the Tory party, and the subsequent potential for another general election.”
David Madden, market analyst at CMC Markets UK, said: “The departure of Mr Johnson from the Cabinet is a major blow to Theresa May’s leadership, and it could call her future into question.”
He said any signs of a leadership contest could weigh on the pound.
THE pound tumbled on Monday amid political jitters as the resig-nations of Foreign Secretary Boris Johnson and Brexit Secre-tary David Davis raised ques-tions over Theresa May's future as Prime Minister. Sterling was up as much as 0.5 per cent against the US dollar in morning trading, with Mr Davis's original departure having been interpreted as increasing the chances of a so-called "soft Brexit". But the foreign secretary's res-ignation in the afternoon sent the pound down nearly 0.4 per cent to trade at 1.324. Against the euro, sterling fell 0.3 per cent to 1.126. The currency's losses pro up London's blue chip index which ended the session up 0.9 per cent or 70.29 points at 7,687.99 points. David Madden, a market analyst at CMC Markets UK, said: *The FTSE 100 has been helped by Boris Johnson's res-ignation as foreign secretary, as the drop in the pound lifted the British equity benchmark 'The departure of Mr Johnson from the Cabinet is a major blow to Theresa May's leadership, and it could call her future into question.' The resignations of the two Cabinet "big beasts" come just days after Mrs May secured senior ministers' agreement at Chequers for a Brexit plan about which both men had expressed reservations. Mr Madden said any signs of a leadership contest among the Tories could further weigh on the pound. Across Europe, the French Cac 40 and German Dax ended the day up 0.4 per cent and nearly 0.4 per cent respectively. Brent crude prices jumped 1.1 per cent to 77.94 US dollars per barrel as investors remained concerned over US plans to reintroduce sanctions on Iran, which will hit global oil supplies. In UK stocks, JustEat was among the best performers, rising 19.6p to 840p after it was upgraded by RBS to "outper-form" with a price target of 950p. Stobart shares jumped Tap to 2361np as its chairman fain Fer-guson narrowly survived an attempt to oust him from the company, following a vote at its annual general meeting. But the board also blocked the reappointment of its former chief executive Andrew Tinkler, which had been voted through by shareholders. The board said it was not in the best interest of the company for Mr Tinkler - who was sacked for urging Mr Ferguson's resigna-tion - to become a director. Mothercare shares fell 1.1p to 27'np after the retailer con-firmed it would close another raft of stores, meaning 60 of its outlets will be shut by June next year, putting 900 jobs at risk. The retailer said it was putting its Children World division into administration, but that 13 of these 22 stores would be saved. The changes come after Moth-ercare cleared a restructuring plan known as a Company Vol-untary Agreement (CVA), an insolvency procedure that required the approval of the retailer's landlords. The group has also undertaken a significant fundraising initia-tive to raise £32.5m from its existing shareholders. The biggest risers on the ME 100 were Antofagasta up 32p at 976p, Melrose Industries closing the day 5.8p higher at 213.9p, BHP Billiton up 44p at 1,708.2p, Evraz up 12.8p closing the day at 522.8p. The biggest fallers on the FTSE 100 were Severn Trent closing the day 65p lower at 2,003p, United Utilities Group down 17p stand-ing at 766.4p, National Grid down 8.7p closing the day at 867.8p and Royal Mail down 4.3p dosing the day at 486.7p.