Pound tumbles on Brexit concerns
Print Edition
WORRIES about the economic impact of leaving the European Union hit Britain’s property market and drove the pound to a new 31-year low yesterday as Conservative members of parliament began voting for a new prime minister.
Home Secretary Theresa May and Andrea Leadsom, a junior energy minister, emerged as frontrunners to replace David Cameron, who said he would step down after Britons voted on June 23 to break away from the EU.
The drawn-out selection process will run until September, but signs are multiplying that concerns about the impact of “Brexit” on trade, investment and business confidence are already hitting the economy.
Aviva Investors said it had suspended trading in its UK property fund because of “extraordinary market circumstances,” a day after Standard Life Investments took similar action following a rush by investors to withdraw money. Shares plunged in other property-related funds, and asset managers and insurers were also hit.
High street retailer John Lewis said sales growth had slowed in the week after the vote.
The pound fell below US$1.31 for the first time since 1985, and is now trading about 12 percent below its pre-referendum levels.
“There is evidence that some risks have begun to crystallize. The current outlook for UK financial stability is challenging,” the Bank of England said, announcing measures to encourage banks to lend.
Voters were bombarded with warnings from Cameron and a host of financial institutions and think-tanks that Brexit would plunge Britain into a self-inflicted recession by jeopardizing its access to the EU’s tariff-free single market.
The “Leave” campaign derided such arguments as Project Fear, arguing Britain would prosper by regaining independence from Brussels and freeing itself to set its own laws, clinch its own trade deals and set a cap on immigration — something it cannot do under EU rules allowing free movement.
With the government and Labour opposition both into disarray by the vote, Conservative lawmakers began casting their ballots in the first of a series of votes to whittle down the field of five candidates to replace Cameron.
May, who has run the security and law-and-order portfolio in Cameron’s Cabinet for six years, is the bookmakers’ favorite and enjoys the greatest backing among parliamentarians.
Leadsom has no Cabinet experience, but has the advantage of emerging on the winning side in the referendum, where she helped lead the campaign to leave the EU while May was in favor of staying.
Leadsom, 53, who had a 25-year career in financial services before turning to politics, received a boost when leading Brexit campaigner Boris Johnson gave her his backing.
The other contenders are Stephen Crabb, the work and pensions minister; Liam Fox, a former defense minister; and Michael Gove, justice minister and the Leave campaigner who turned against his ally, Johnson, driving him from the race.
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