Brexit chaos sees sterling plummet amid mass sell-off

The British pound is in turmoil after Brexit secretary Dominic Raab resigned and Theresa May faces a vote of no confidence. Picture: Daniel Leal-Olivas
The British pound is in turmoil after Brexit secretary Dominic Raab resigned and Theresa May faces a vote of no confidence. Picture: Daniel Leal-Olivas
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Sterling and shares in banks and housebuilders slid as Cabinet departures and rumours of no-confidence triggered a mass sell-off and sent the pound tumbling.

The pound dropped sharply on a turbulent day for the UK market, falling more than 1.5 per cent against the dollar to fall below $1.28, and also losing same again against the euro to dip below €1.13.

The British currency’s turmoil came after the shock resignation of Brexit secretary Dominic Raab, who was quickly followed by work and pensions secretary Esther McVey, as the ministers protested the draft EU withdrawal agreement which Prime Minister Theresa May had pushed through her Cabinet on Wednesday evening.

Stocks exposed to the UK economy were plunged into the red, with housebuilders and banks reporting the heaviest losses, although analysts warned a sustained weaker pound would also pull down the struggling retail sector.

Lender Royal Bank of Scotland lost 9 per cent, while home developers Persimmon, Taylor Wimpey and Barratt Developments also suffered substantial falls.

The turbulence meant a volatile session for the FTSE 100, which was dragged below the 7,000-point mark before recovering to close up 4.22 points at 7,038.01.

Sterling was exposed to further uncertainty when leading Brexiteer Jacob Rees-Mogg later submitted a letter of no confidence in May.

Connor Campbell, financial analyst at SpreadEx, said: “Struck down with a nasty case of ‘Brexititus’, the pound showed no signs of recovery as Thursday went on, the currency fearfully waiting to see whether Theresa May’s draft deal would prompt any more resignations.

“Uneasy at the open, the departures of Brexit secretary Dominic Raab and work and pensions secretary Esther McVey sent sterling into a spin during the morning session.

“News of Jacob Rees-Mogg’s letter demanding a vote of no confidence in May hardly helped, though crucially, perhaps, neither did it substantially make things worse.”

Laith Khalaf, senior analyst at Hargreaves Lansdown, said the market had “taken a big red pen” to under pressure banking, retail and housebuilder stocks. He said: “The potential for an orderly Brexit to unravel in the next few days is causing further distress to be manifested in share prices.

“If sustained, a weaker pound spells bad news for a retail sector which is already struggling, as it hikes up the price of imported goods and at the same time squeezes consumer incomes.”

Jesse Cohen, senior analyst at investing.com, added:“Brexit has turned into a real mess. I highly doubt the UK and EU will agree on Brexit terms by the 29 March deadline.

“Instead, I see this going down the ‘kick the can down the road for as long as possible’ route. I wouldn’t be surprised if we were still talking about Brexit negotiations five years from now.”