Branson: Pound could be just a dollar in ‘no-deal’ Brexit
Virgin Group founder Richard Branson has warned that the pound’s value would fall to that of the dollar if Britain leaves the European Union (EU) without a deal – a stark prediction that will fuel worries about the economic pressures facing the country.
Traders see the possibility of a ‘no-deal’ Brexit increasing because Boris Johnson, the front-runner in the Conservative Party contest to replace Prime Minister Theresa May, refuses to rule it out.
After being granted two extensions to its original March 29 departure date, Britain is now due to leave the EU on October 31. Johnson has said that as prime minister, he would see it does come what may.
Branson told the BBC in an interview broadcast yesterday that his companies would be forced to shift investment away from Britain if the country leaves the EU without a divorce agreement because many of their costs are in dollars.
“The pound was at $1.53 when the referendum took place. The pound today is at $1.22, $1.23, and the pound will collapse to parity with the dollar if there is a hard Brexit,” Branson said.
Parity between the currencies has never happened, so his prediction about a further weakening in the pound – it’s also struggling near a historic low against the euro – is likely to sound alarm bells in the United Kingdom, especially as many Brits are getting ready for summer holidays.
Branson’s warnings came as the Bank of England said the risks of Britain crashing out of the European Union without a deal had increased since the start of the year.
Most economists think the British economy would sink into a deep recession in that scenario as tariffs are slapped on exported goods and other dislocations and disruptions are imposed on trade.
The bank said in November that a ‘no-deal’ Brexit could cause the British economy to shrink by around eight per cent in a matter of months – though contingency measures put in place since then may lessen the blow.
The British economy is already being burdened by uncertainty over Brexit, largely because firms are holding back any investment plans because they have no idea what the country’s future trading relationship with its main export market will be.