Pound tanks as May warns Brexit talks have stalled

Alanna Petroff
Senior Economics Correspondent at Yahoo Finance UK
May said Friday that the European Union’s abrupt dismissal of her Brexit plan was not acceptable. Photo: Jack Taylor/Getty Images

The pound declined sharply on Friday – down by 1.5% – to below $1.31 as Prime Minister Theresa May warned in a surprise Brexit speech that the UK should prepare for a no-deal Brexit scenario.

She said Britain and the EU were unable to reach an agreement on key issues.

The currency had started falling before May’s speech and continued dropping as she took the stage.

Traders have been nervous about the prospect that negotiators would be unable to reach a comprehensive deal on trade, borders, immigration and other crucial items.

The pound dropped sharply after May’s speech on Friday

While on the face of it nothing has changed, there was a significant air of optimism that something tangible would come out of [recent] Salzburg [negotiations],” said Michael Hewson, chief market analyst at CMC Markets. “The opposite turns out to have been the case.”

“It now appears that both sides are now at an impasse. The odds of a ‘no deal’ have just increased,” he said.

These ‘no-deal’ concerns have similarly led many UK-based businesses to hold off on making investments.

A new study released on Friday by the manufacturing group EEF found that one in four manufacturers have put investment plans on hold, or expect to lose skilled workers and contracts, because of Brexit.

The survey of 500 firms found that one in six believe business would become “untenable” for them if there are increased border checks and the reimposition of tariffs.

Brexit is scheduled to happen at the end of March 2019.