British pound falls to just above $1.27, hits 31-year low amid Brexit fears
The British pound slumped to its lowest level in 31 years on Tuesday on fears that the U.K.’s divorce from the European Union will be bad for the economy.
The currency fell to just above $1.27, lower even than in the immediate aftermath of the EU referendum on June 23, when Brits voted to take their country out of the 28-member group.
Brexit plans have begun to emerge in the last few days: talks with the EU will begin in early 2017, the exit will happen two years later, and the U.K. will give priority to controlling immigration.
European leaders have made clear that if Britain does not allow free movement of EU citizens across its borders, it will lose some of its rights to access the free trade area.
So investors are worrying again about two big issues: British exporters may find it harder to compete in Europe, and the country’s banks could lose the ability to do business freely across the region.
Thousands of financial firms in the U.K. currently have “passports” that allow them to trade in Europe without establishing subsidiaries in each country. And those businesses are vital for Britain: the financial and related services sector accounts for 12% of GDP.
Bloomberg reported Tuesday that Prime Minister Theresa May would “refuse to prioritize” the financial services industry in exit negotiations with the EU. Citing three anonymous government sources, Bloomberg said the sector held far less sway with May than with her predecessor David Cameron.
