Last week, the Pound plummeted to a new low last week. Fresh from Boris Johnson’s appointment as Prime Minister, the pound reached its lowest rate against the Dollar in the past two and a half years. It is yet to recover to its pre-Brexit referendum levels, and it has weakened considerably against the Euro over the same period.
The Pound’s performance in the currency markets is likely to get worse before it gets better too, with a no-deal Brexit appearing more likely every day. This will affect many different areas of the UK’s economy, from fuel prices to high street currency exchanges to general living costs. The bottom-line is that without a strong pound it will deter foreign investment and trade for UK businesses.
Logically, this should result in the UK’s export market growing. With the price of UK goods dropping, they should become more appealing to foreign investors and help create an export boom. But this has not happened with export rates remaining consistent since the referendum result was announced, so there is still hope that they could rise again soon. That is unlikely to happen however until there is certainty over the UK’s departure from the EU.
Notably, the Pound recovered slightly whenever a ‘soft Brexit’ or leaving with a deal became a more realistic possibility. Such a scenario would allow businesses throughout the UK to properly prepare for the UK’s departure from the EU and provide them with much needed certainty. This granted businesses the necessary assurances required to begin spending again to help stimulate the currency market.
The Pound’s volatility in recent times though has made it difficult for economists to predict how the market will change in the build up to the next Brexit deadline. Few are willing to state whether it will recover or regress further, and only time will tell what it will mean for businesses going forward
Robert McConnell, NI Chamber.