Boris Johnson’s bid to suspend Parliament before Brexit sends shock waves through financial markets
Boris Johnson’s bid to suspend Parliament before Brexit yesterday sent shock waves through financial markets.
In the minutes after the Prime Minister’s move was announced, the pound fell against the euro and dollar while shares in housebuilders were battered.
Analysts said the move increased the chances of a No Deal Brexit on October 31.
James Smith, an economist at ING, said: ‘The main implication is that this will make the legislative path to blocking a No Deal Brexit much harder.’
As the pound plunged, shares in companies whose fortunes are closely tied to the UK economy also drifted lower.
Experts and business leaders have warned that No Deal could hurt the economy and tip the UK into a recession.
Housebuilders were the biggest losers, with Berkeley Group falling by 4.8 per cent, Taylor Wimpey by 3.6 per cent Persimmon by 2.9 per cent and Barratt by 3.4 per cent.
Dr Adam Marshall, director general of the British Chambers of Commerce, said: ‘Businesses feel like Westminster is playing an endless game of political chess, while their futures and the health of the UK economy hang in the balance.
‘Out in the real world, continuing political turbulence is taking a toll on contracts, on investment decisions, and on business confidence. Three years on, the damage continues. The top priority is still to avoid a messy and disorderly exit from the EU.’
Despite the turmoil the FTSE 100 edged up by 0.4 per cent. The blue-chip index was buoyed partly by BP and Shell, which benefited from an oil price rally. However the FTSE 250 index fell 0.7 per cent.
The pound dipped lower after reaching a four-week high on Tuesday. It had been boosted by fresh optimism that a Brexit deal could be struck, following suggestions from France and Germany that changes could be made to the Irish backstop.
Those gains were wiped out as the pound sank to lows of just under €1.10 and $1.2155. It later pared its losses slightly.
Andy Scott, at risk advisory firm JCRA, said: ‘The fact that sterling is heading towards historic lows against the US dollar and the euro reflects not just uncertainty over Brexit but, increasingly, the risk that the UK crashes out and suffers a significant economic shock as a result.’