Alan Hill
Treasury Consultancy
Sterling has had a precipitous fall since the Brexit vote in June last year. Everyone is aware that the currency is being dominated by political uncertainty. The issue has been distilled down to a matter of access to the single market.
It is a case of the lowest common denominator to say “inside single market good, outside single market bad.” However, even reading the EU website on the matter it is still vague and my conclusion is that it would be a matter of spite if the EU denied access following Brexit.
A direct quote from the website is not very encouraging for those on the inside; “The Single Market is at the heart of the European project, but its benefits do not always materialise because Single Market rules are not known or implemented, or they are undermined by other barriers.”
Furthermore, those businesses who trade with the U.K. either importing from or (more likely) exporting to the U.K. will not want to see barriers put in the way of their ability to do business.
It would be suicidal for the commission to equate single market access to free movement of people as there is no direct link between the two and it simply amounts to horse-trading which is neither sensible of dignified.
There is still a long way to go and the imminent outcome of the High Court decision over the amount of consultation the Government needs to have with Parliament cast a long shadow over the process.
U.K. exporters are already starting to see the benefits of the fall in sterling and this will open up new markets going forward. Imports are more expensive and this is inflationary but a hike in interest rates would be the least of all evils and will benefit savers and pensioners. Raw materials are barely an issue since there is so little manufacturing taking place in the U.K. now.
A systemic correction for the pound is an overall positive for the whole process and should be viewed as such but is any more necessary? Probably not.
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