Listen to this articleFormer head of the UK civil service, Lord Kerslake, has warned that British pound will continue to fall in worth and could reach parity with the dollar for the primary time in historical past if there isn’t any Brexit deal.
Lord Kerslake, who was the top of UK civil service 2012 – 2014, advised Business Insider that the British pound could drop to $1 within the occasion of a disorderly exit from the European Union on October 31.
“You could reasonably expect that it will carry on falling, potentially to parity with the dollar,” Lord Kerslake mentioned.
Sir Bob KerslakeBoris Johnson, UK’s new prime minister who took over from Theresa May, has lengthy vowed that the United Kingdom will go away the European Union on October 31, with or with none settlement.
In an emotional assertion on Friday May 24, Theresa May announced her resignation after Brexit deal she fought onerous for, failed.
Since Boris Johnson took over final month, the rising skepticism of him delivering no-deal has affected the worth of the pound which has continued to fall.
In the final three months, Pound has dropped greater than seven p.c – the worst efficiency of any main foreign money. It fell 0.6% to $1.2056 on Friday, its weakest since January 2017, including to its 4.5% fall over July and August.
As at August 11, 2019, 1 Pound sterling = 1.20 United States Dollar.
Official figures launched on Firday confirmed that that the UK economic system shrunk by 0.2% within the second quarter of this yr — the primary time it has skilled unfavourable development in seven years.
Kerslake additionally mentioned the Bank of England could be compelled to contemplate mountain climbing rates of interest to forestall a chronic run on the foreign money in a no-deal state of affairs, a transfer which might drive up inflation, client costs, and mortgage charges.
“The normal response, if you face a major run on a currency, is to raise interest rates,” he mentioned.
“But that’s immensely damaging to the economy, and to people’s real incomes because it results in higher mortgage rates. So we could face a very, very difficult dilemma.”
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Rupert Harrison, a fund supervisor at BlackRock, and analysts at Morgan Stanley have additionally predicted that the pound could commerce stage with the dollar within the occasion of a no-deal Brexit.
“The pound is at a much lower level now but I still think a no-deal exit would lead to significant volatility and we could be testing parity on a really bad outcome,” Harrison told Bloomberg.
