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Brexit News

Brace for Brexit

19 Feb 2019

Jeremy Cook, WorldFirst: The UK continues to stagger towards March 29th with all the poise and élan of a drunkard shambling towards the bar and Westminster has not covered itself in glory following the postponement and eventual defeat of the PM’s deal – we are back to square one but with simply less time within which to extricate ourselves.

Theresa May is right on one thing of course: without agreement, the UK is heading towards a no deal scenario and the obvious pain, dislocation and disruption that such an outcome would heap on to UK businesses.

There has been increasing chatter of a 2nd referendum and while that may have offered a momentary sigh of relief to some, there is nothing concrete to set your plans against. Businesses need to be preparing for a no-deal Brexit.

Before Christmas, WorldFirst put together the SCARF plan for businesses to follow to prepare their operations for the ensuing ill winds of whatever Brexit may be forthcoming. 


A view of the possible future

Recent comments from politicians have suggested there is a chance that Article 50 may be extended. The European Union needs to agree to this of course and thoughts are that while they may be happy to extend the deadline in the event of a general election or a second referendum, they may not if the reason is for the UK government to simply get their act together.

In the short term, parliament will continue to feel out what actually is wanted; a customs union, no-deal, a second referendum, an election or an extension of Article 50 with debates and votes winding down the clock towards the end of Article 50.

In the grand scheme of things, and at the time of writing in late-January, we have nine weeks until March 29th. Some will say that, that leaves our politicians eight weeks and five days to mess about before pulling an extension and delay out of the fire before midnight strikes. WorldFirst have felt that all of the back and forth was always going to end up in a last-minute decision; it’s far too much of a political process to be anything else!

The pound’s reaction

Sterling is the barometer of Brexit risk and, despite all the fun and games in Westminster so far this year finds itself higher in 2019 so far.

In a no-deal Brexit scenario, we have to remember what happened to sterling after the referendum result became clear; it fell 13% against the USD and 10% against the EUR. And, back then most commentators still believed that the UK would leave with a membership of the Single Market intact and with broad equivalence of regulations in place. We now know that’s not how this ends and most people seem to agree that what follows from a no deal scenario is not good, especially for the pound.

So how low could sterling go in this worst-case scenario? WorldFirst think that we would see an immediate decline in sterling beyond the recent lows of 1.17 in GBPUSD and a move towards parity in GBPEUR – and that hasn’t happened since 2008.

What about if Article 50 is extended?

Sterling’s reaction in this situation is contingent on a lot of moving parts; how did we get to the Article 50 extension? If it’s on the basis of a 2nd referendum that will be viewed a lot more positively than a delay to Article 50 so that the UK can go through a general election. Businesses and international investors don’t like Brexit uncertainty and that insecurity would extend to the prospect of a potential change of government. 

Whether you are marking an international money transfer for you or your business, WorldFirst will work with you to find the right solution for your needs. IoD members benefit from no fees and a best exchange rate guaranteed.

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