The pound falls against the dollar to a 31-year low as the UK gets ready to leave the European Union. Brexit is having some significant consequences on the United Kingdom’s economy.
Sunday, British Prime Minister Theresa May delivered a speech during the Conservative Party’s annual conference where she announced that there is no delaying in the United Kingdom’s exit from the EU.
May, who replaced David Cameron as prime minister in July, said that Article 50 will be triggered in March of 2017. Article 50 is a clause featured in the 2007 Treaty of Lisbon that permits nations to exit the European Union.
By 2019, the U.K. will be entirely split from the EU. Within hours, the British currency took a tumble. Early Monday morning, the pound sterling dropped to a 31-year low against the dollar.
The pound sank 0.5 percent to just $1.276 – its lowest level since 1985. May’s speech led the pound to slip to its lowest in three years against the euro. Days after the referendum results the currency also took a significant dive.
Some experts say that May’s controversial remarks during the speech could have also caused the pound to dip. At the conference, she stated that “we are going to leave the EU” to reclaim sovereignty and control the number of immigrants coming into the UK. May said:
“We will do what independent, sovereign countries do. We will decide for ourselves how we control immigration. And we will be free to pass our own laws.”
The prime minister went on to say that she is looking for free trade deals in other places other than Europe. May explained:
“Britain is a country with the self-confidence and the freedom to look beyond the continent of Europe and to the economic and diplomatic opportunities of the wider world.”
May said she will lead the country as it goes through a hard Brexit, where it will “sacrifice membership in the single market in order to retain more control over immigration.” She stated:
“We have voted to leave the European Union and become a fully independent, sovereign country. We will do what independent, sovereign countries do – decide for ourselves how we control immigration.”
May also claimed that she expects the economy to grow because “its fundamentals are strong.” Chancellor Philip Hammond said after the pound’s decline that he believes that the Brexit would be a “rollercoaster” ride. He said:
“We have to expect a period when confidence will go up and down – perhaps on a bit of a rollercoaster – until we get to a final agreement, where businesses and consumers can understand what the future relationship between Britain and the European Union will be.”
“Exporters will see their goods become more cost competitive in global marketplaces, especially while the country remains within the EU. Many analysts think that puts far more pressure on the United Kingdom than on the European Union, given that the United Kingdom only accounts for a much smaller proportion of European Union exports and GDP.”
It is not all bad news with the fall of the pound. British fashion house Burberry, which sells its designs mainly in the U.S., Europe, and Asia said the drop had benefited their earnings, but they fear the company might struggle after Brexit. Many forecasters see a sluggish growth or even a recession for late 2016 early 2017.