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Pound sterling drops to 3 year low as March deadline set on Brexit

Theresa May announced that Britain will trigger Brexit negotiations by the end of March

Image: EMPICS Entertainment

THE POUND HIT a three-year low against the euro today after Prime Minister Theresa May said Britain will trigger Brexit negotiations by the end of March and her finance minister warned of “turbulence”.

Sterling weakened to 87.46 pence against the euro, the lowest level since August 2013, after May’s government gave more details about how Britain will leave the European Union at the Conservative Party conference in Birmingham, central England.

Finance minister Philip Hammond said people should expect “some turbulence as we go through this negotiating process”, adding that consumer and business confidence could go up and down like a “rollercoaster”.

His comments came the day after May revealed Britain would start the two-year exit process by the end of March, putting it on track to leave by early 2019 and opening the door for painful negotiations with EU partners.

The new premier, who took power in July after David Cameron quit following the Brexit vote, also indicated willingness to leave the single market in order to secure control over immigration from the EU.

At the start of the week’s trading in London, sterling also fell to $1.2853 against the dollar, a fall of around 0.5 percent since closing on Friday.

“Whilst markets welcome the update (from May), there is still a great degree of uncertainty surrounding what Brexit negotiations will involve,” said Ana Thaker, a market economist at PhillipCapital UK.

“It is generally considered that the more May insists on immigration control, the more the EU is likely to close access to the single market,” an analysis by Rabobank Financial Markets Research added.

“The drop in the value of the pound this morning reflects investors’ concerns.”

Theresa May 60th birthday Theresa May. Source: Matt Cardy - WPA Pool/Getty Images

Between a rock and a hard place”

Speaking this afternoon on RTÉ’s News at One, chief executive of the Irish Exporters’ Association Simon McKeever said that Irish businesses were between “a rock and hard place” when it came to the Brexit negotiations.

“I don’t see anywhere where the UK can go with this,” said McKeever.

“[The UK] are heading towards a very hard Brexit which is very bad for Irish exporters.

Because it brings into play all kinds of things like the slowdown in the UK economy but also what’s going to happen with borders and customs and all of that.
So we’re looking at the worst case scenario in terms of a Brexit in all of this.

McKeever said it was “absolutely crucial” that Irish businesses started to perform risk assessments and future planning to offset the potential damage Brexit could cause them.

Strong economy

Britain’s economy has performed more strongly than some analysts expected in the aftermath of June’s surprise Brexit vote.

In a key indicator of the strength of the manufacturing sector, the Markit/CIPS UK manufacturing PMI (purchasing managers’ index) rose to its highest level since mid-2014, according to figures out yesterday.

Sterling stabilised on the news, which showed manufacturing had benefited from the lower pound.

However, there is uncertainty among many major employers about long-term investment decisions due to Brexit.

Last week, carmaker Nissan’s chief executive Carlos Ghosn said it was delaying new investment at its giant plant in Sunderland, northeast England, announcing: “We cannot stay if the conditions do not justify that we stay.”

Hammond acknowledged yesterday that there could be difficult times ahead as Britain negotiates its exit from the EU.

“We have to expect a period when confidence will go up and down — perhaps on a bit of a rollercoaster — until we get to a final agreement,” he told the BBC.

© AFP 2016 With reporting from Cormac Fitzgerald

Read: What businesses can expect from the government’s billion-euro Budget giveaway

Read: Theresa May says the UK will trigger Article 50 to start EU withdrawal before March 2017

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