The pound’s slide won’t bail out Britain’s economy as Brexiteers claim

Inside Business: Chancellor Philip Hammond says he’s terrified – and we should be too

The man in No 11 is not given to hyperbole, so his recent pronouncement should be cause for serious concern (PA)

The misinformation, tortuous arguments and out-and-out lies spun by Brexiteers get more and more twisted by the day.

The latest concern the pound, which has spent two days on the ropes thanks to Boris Johnson’s bellicose no-deal Brexit comments, and is now in the must-be-sold-now-or-it’ll-go-off ultra-cheap part of Lidl.

Parity with the euro is now in sight. A truly dismal performance.

Naturally Brexiteers started to bloviate in response, as is always the case when the reality of the economic vandalism they are engaged in bites.

In summary: not a problem. It will make our exports cheaper. Huzzah.

So far there’s been little sign of that. The pound wasn’t exactly strong before it fell out of bed in response to Johnson’s posturing at one of the interminable series of Tory leadership hustings held for the benefit of the party’s cadres of angry pensioners. The “benefits” of that weakness are hard to see.

It’s true that exports rebounded in the most recent quarter, according to official figures, but they’d fallen into quite the trough so that isn’t saying much.

They may be headed back into it. The latest manufacturing Purchasing Managers Index number for manufacturing, for example, was awful. It indicated that the sector is in decline (ditto construction, which was even worse, while even services have stalled).

Britain’s makers are, the data said, struggling to get orders to clear the stockpiles they built up ahead of the last no-deal cliff edge that was only narrowly avoided by Theresa May reluctantly securing Britain a Brexit extension.

The entire business community, which has a far better understanding of the reality of what Johnson is threatening than most Tory politicians, is scared witless. So is one of the exceptions, Philip Hammond, the chancellor, who described the attitude of Johnson supporter Jacob Rees-Mogg towards no deal as “terrifying”.

People would usually pay heed to that. Hammond has, in many ways, been a very Tory chancellor. But by those somewhat disagreeable lights, he has been a largely competent one, who has kept the economy on an even, if slow growing, keel since the EU referendum. He knows what he’s doing and he knows what he’s talking about.

The very fact that a politician like him, one who is not given to hyperbole, should feel the need to say such a thing is terrifying in itself.

The actuality of the weak pound is that it is a decidedly mixed blessing. It could in theory boost British exports, but the flip side is that it will also increase exporters’ input costs for imported raw materials and components, so not by as much as you might imagine.

Such benefits that it might bring will also take time to come through, if they are even realised. UK manufacturers, for example, will need to persuade customers to switch to them over time. Much of the rest of the world is decidedly leery when it comes to dealing Britain and its businesses at the moment because of the uncertainty created by the Brexiteers.

Ah, but that’ll soon be over, they say, because we’ll have our super no deal which we told everyone couldn’t happen when we were busy lying through our teeth during the referendum.

The problem with that, of course, is it will cause exporters to face sizeable tariffs they don’t currently face from Europe and most of the rest of the world under WTO rules (the Department for International Trade has a very poor record of getting the existing deals we benefit from as part of the EU rolled over).

Here’s another wrinkle: the growth in world trade has effectively stalled thanks to the ongoing trade tensions between the US and… just about everyone, which creates another problem for UK manufacturers. Even if your goods manage to look competitive after those tariffs, who do you sell them to in those sort of conditions?

Yet another issue is that the ability of the Bank of England to help a post-Brexit economy through monetary stimulus will inevitably be constrained because the weak pound makes imports more expensive, stoking inflation, hitting the pound in every Briton’s pocket.

As Adam Posen, president of the Peterson Institute for International Economics, has noted, Britain had a test drive of what a falling pound could do in the aftermath of the financial crisis when it fell by 25 per cent. It didn’t have the impact economists might have expected on Britain’s trade gap with the rest of the world.

Living standards have, according to the Resolution Foundation, already been hit to a greater extent than they were during the economic slump of the early 1990s. Slow wage growth, inflation, and the weak pound have all played a role.

Well, you ain’t seen nothing yet.

Yes, yes, I know. Putting forward arguments based on facts and reality and expert opinion is all but pointless in response to Brexiteers and Johnson braying about “optimism” and “project fear” like a scratched piece of vomit-green vinyl.

Trouble is, project fear is already with us. And, as Hammond said, what we’ve got coming in the absence of an outbreak of sanity is... well, do I really need to repeat it?