The pummelled pound is going to continue to be battered in the short-to-medium term under either Boris Johnson or Jeremy Corbyn, says the chief executive officer of one of the world’s leading financial advisory organisations.
Nigel Green, the founder and CEO of the deVere Group*, spoke out after sterling dropped more than 4% on Tuesday in its worst month since October 2016 on an increasing probability of the UK leaving the EU on October 31 in a no-deal Brexit.
Green said: “The British pound is now the second-worst performing currency in the entire world. There is no end in sight to the embattled British pound’s plight with both the current Prime Minister Boris Johnson and the leader of the official opposition Labour leader Jeremy Corbyn promoting policies that will deliver fresh – and serious – blows to the currency.”
He continued: “Mr Johnson is ramping up no-deal preparations and it looks increasingly likely the UK crashes out of the EU in a no-deal scenario in October. Even though this has largely been priced-in by the markets, there can be no doubt that it has also intensified uncertainty and, in response, the already weak pound fell and continues to flounder.
“We can expect this to continue as the Johnson administration takes brinkmanship with the EU to a higher level, the closer we get to the Brexit deadline. Should the UK leave with no deal, the pound can be expected to remain weak for several years until the country and the bloc readjusts.”
Green went on to add: “In addition, many observers predict that there will be a general election before the end of the year. All by itself this, too, will create uncertainty and therefore turbulence for sterling.
“But should a Corbyn-led Labour party win that election, there will be even more bad news for the pound. His anti-business rhetoric, and high tax and low-profit policies would lead to considerable and sustained selling of the pound.”
Last month, Green noted: “During the past two years, the pound has been battered when it comes to its price against other currencies.
“The significant drop in the value of the pound has contributed to reducing people’s purchasing power and a drop in UK living standards. Weaker sterling means imports are more expensive, with rising prices being passed on to consumers.
“The fall in the pound is good for exports some claim, but it must be remembered that around half of UK exports rely on imported components. These will become more expensive as the pound falls in value.
“A low pound is, of course, bad news for British holidaymakers and travellers abroad. Even destinations such as Dubai and China are more expensive as their currencies are pegged to the US dollar.
“Arguably, the key issue for the UK, however, is that one of its biggest and most important sectors, financial services, will suffer from another knock to the pound. It will be hit because it is built on foreign investment that puts its faith in a strong pound.”
The deVere Group CEO concluded: “Whatever happens now, the already battered British pound is set for more punishment under either Johnson or Corbyn. As such, we can expect to see a surge in domestic and international investors in UK assets considering the international options available to them in order to build and safeguard their wealth.”
*The deVere Group is one of the world’s largest independent advisors of specialist global financial solutions to international, local mass affluent and high-net-worth clients. It has a network of more than 70 offices across the world, more than 80,000 clients and $12 billion under advisement.