Pound sterling drops after government’s no-deal Brexit plans revealed

Businesses said technical notices published by Dominic Raab on Thursday did not provide sufficient detail

The pound dropped against the dollar and euro on Thursday, after Brexit secretary Dominic Raab unveiled the first of his department’s contingency plans for a no-deal exit from the EU.

Sterling fell 0.6 per cent against the dollar, to $1.2835, and was down 0.3 per cent against the euro, at €1.1103.

Connor Campbell, analyst at Spreadex, said Mr Raab’s advice for an “increasingly likely” no-deal Brexit “appears to have spooked sterling”.

The plans revealed UK credit card users could be forced to pay a ‘Brexit tax’ amounting to £166m, and also indicated businesses and individuals could face increased costs for slower cross border payments.

Business advisers and analysts said the publication of the “technical notices” would do little to dispel fears around a no-deal Brexit.

“This latest set of guidance cannot conceal that in the event of a ‘no-deal’ Brexit, this country and its economy will be sailing into uncharted waters with unpredictable results,” said Robert Bell, partner at law firm Bryan Cave Leighton Paisner.

“So, far from reassuring the business community, this guidance is likely to heighten anxiety about the government’s conduct of the exit negotiations, and provoke real doubts as to whether the government is as close to a successful deal as they contend. The true value of this exercise is really a lesson in ‘realpolitik’.”

Andrew Pilgrim, government financial services leader at EY, said the notices had not provided much more information for businesses trying to plan ahead.

“There is nothing that will take the financial services industry by surprise in today’s Brexit papers,” he said.

“While today’s papers reiterate that the UK government is doing all it can to maintain continuity in that scenario, there is a limit to what they can promise unilaterally.

“Whether there would be similar flexibility from the EU is likely to remain unclear for some time. Until then uncertainty remains the word of the moment.”

Mike Cherry, national chairman of the Federation of Small Businesses, said the dangers of a sudden, unplanned Brexit had been laid bare, but added the government advice was still lacking clarity.

“A pro business Brexit is one with a transition period – a vital lifeline that won’t be there in a no-deal scenario. The smallest firms will be the least able to cope with a cliff edge moment,” he said.

“It’s right to prepare for a no-deal outcome. That means following up these notices with guidance that every small business owner can understand. ‘Technical’ is certainly the word – anyone without real expertise won’t be able to make head nor tail of these documents.”

Meanwhile, Adam Marshall, director general at the British Chambers of Commerce, said the notices were a good start, but agreed more detail was needed.

“Ministers say they will take unilateral steps to keep trade moving freely, but must demonstrate what they will concretely do to limit the impact of delays, inspections and red tape,” he said.

“It is unfortunate that businesses face several weeks’ wait for further information and clarification. Every additional delay means less time for businesses to prepare, ahead of the UK’s fast-approaching exit from the EU.”