Sterling skidded against the dollar and the euro on Friday, after British Prime Minister Theresa May failed to give any concrete details for how Britain might retain preferential access to Europe’s single market.
“Traders looked for hints around future access to the single market, and were disappointed not to find them in the prime minister’s speech.”
Sterling had risen against the dollar on Thursday after the BBC reported May would say Britain is willing to pay 20 billion euros (£17.70 billion) to the EU during a post-Brexit transition period, conditional on access to the bloc’s single market.
But May made no mention of any concrete payment figure in her speech.
“Traders looked for hints around future access to the single market, and were disappointed not to find them in the prime minister’s speech.”
Sterling had risen against the dollar on Thursday after the BBC reported May would say Britain is willing to pay 20 billion euros (£17.70 billion) to the EU during a post-Brexit transition period, conditional on access to the bloc’s single market.
But May made no mention of any concrete payment figure in her speech.
A few hours after Prime Minister Theresa May set out plans for new ties with the European Union, Moody’s cut the rating by a further notch to Aa2, underscoring the economic risks that leaving the bloc poses for the world’s fifth-biggest economy.
The government hit back, saying Moody’s assessment of the Brexit hit to the economy was “outdated” and that May had set out an “ambitious vision for the UK’s future relationship with the EU” in her speech on Friday.
“Overall, Moody’s expects spending to be significantly higher than under the government’s current budgetary plans,” Moody’s said.
On the tax side, it noted how the government abandoned a controversial plan to raise national insurance contributions for self-employed workers and was reliant on “highly uncertain revenue gains from tackling tax avoidance to fund tax cuts”.
As a result, the budget deficit was likely to remain at around 3-3.5 percent of GDP in the coming years, higher than the government’s plans to cut it below 1 percent of GDP by 2021/22.
That meant Britain was one of the few big European economies where the public debt ratio was likely to rise, probably peaking at about 93 percent of GDP in 2019, two years later than under the latest government plans.
Moody’s said it was no longer confident that Britain would secure a replacement free trade agreement with the EU which substantially mitigated the Brexit hit
Moody’s revised up its outlook on the country to stable from negative, meaning a further downgrade is not imminent