The media in Britain isn’t using the word “crisis” to describe the collapse of the pound. Neither is the international media. The British media is following the London government’s spin and the world media is calling it a “catastrophe.”
Theresa May’s uncompromising position on immigration ahead of the Article 50 negotiations is effectively pushing the United Kingdom down the hard Brexit route. This means that Britain will lose access to both the European single market and the customs union. Brexiteers are keen to sell this approach, claiming that it will give the UK full control over its borders and free Britain to become a trading nation on its own account once again.
Nothing about this is good. In spite of what the suicide pact Brexiteers are saying Britain can’t be the trading nation it once was. This is pure fantasism. Our little island nation no longer profits from empire, and finds itself now – in the real world – surrounded by huge trading blocs. What happens in such blocs, following the principle of scale, is that goods and services are made and sold more cheaply. On its own Britain simply cannot compete in a globalised market with Europe without driving wages south almost to starvation levels.
More to the point, Britain is no longer the workshop of the world. Quite the inverse in fact – Britain, as the Leave campaign was eager to promote, imports far more than it exports. Outwith the common market the UK now faces both a tariff wall to Europe – making our exports about ten percent more expensive abroad – and a devalued pound – making what we import more costly.
It looks as though the £ will reach parity with the € within the week. Good news for exporters but horrible on the cost of living.—
Butterfly Rebellion (@Butterfly_Reb) October 08, 2016
When this hits the ground it will be people at the bottom of the economy; wage workers and the poor, who are going to take the greatest hit. As the banking and financial services face the loss of some 70,000 jobs in London the upward trend in the shift in unemployment will spread right across the entire British economy. This means lower earnings and an increased burden on the welfare system. Ultimately the forecast is bleak – job losses, a continued collapse in the value of the pound, rapid capital flight, and a growing welfare bill can only bleed the coffers dry.
It doesn’t take a genius to realise that the present failure of the British pound is a bad omen. It has taken a sharp did, and when the pundits say things like “slight recovery,” what they mean is that it has had a momentary upturn in an otherwise downward trajectory. International financiers and investors just don’t have confidence in the spin of the Westminster government. Two years of this, with continued secret negotiations and rumours, can only further remove confidence in Britain’s ability to do business.
British pound drops to lowest level in three decades