The pound slumped to its lowest level for almost two years as risks to the British economy grow from political paralysis over Brexit and a possible no-deal situation. Prime Minister Theresa May's decision to delay the parliamentary vote on her Brexit plan sent the sterling tumbling by over 1.3 per cent against the dollar and by almost one per cent against the euro on the foreign exchanges. The pound dipped below $1.26 to the lowest since April 2017 after May said her Brexit plan would have been rejected by a “significant margin” in a Commons vote scheduled for Tuesday.
Chief market analyst at financial trading company Markets.com, Neil Wilson said the pound had experienced one of its worst days since the 2016 referendum, adding that “the government had left investors completely in the dark about what happens next.” Economists at the Capital Economics consultancy said chances of May's deal passing the parliamentary vote in future, whenever it was held, was about 40 per cent with similar odds for a no-deal Brexit. They gave a 20 per cent chance to a second referendum or a longer period of membership in the EU beyond the March 2019 deadline for Article 50.
Senior UK economist at the firm, Ruth Gregory said the delay was “kicking the can further down the road”. They added, “We would not be surprised if Brexit uncertainty, which we estimate has knocked 0.5 percentage points off growth since the referendum, starts to weigh more heavily on the economy.” The more UK-focused FTSE 250 index fell two per cent to its lowest level since December 2016. Thomas Cook, Stagecoach and Dominos Pizza were among the most affected. Director General of the Institute of Directors, Stephen Martin said, “Business leaders may understand the political reasons for the delay, but today's announcement will be viewed by most as another extension of the frustration and uncertainty.”
