Political shock waves after Conservative Party Conference herald further decline of Sterling

Prime Minister Theresa May will resume her foreign outreach this week after stirring global concern that her government’s focus on immigration controls as it leaves the European Union risks alienating international partners as well as curbing access to the single market.

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The Conservative Party leader will travel to Denmark and the Netherlands on Monday for talks with prime ministers Lars Lokke Rasmussen and Mark Rutte respectively as she tries to build understanding for her position ahead of this month’s EU summit in Brussels, her first as premier. The visits to two traditional allies within Europe follows trips to other EU capitals including Berlin, Paris and Warsaw as the U.K. prepares to trigger Article 50 by the end of March, beginning up to two years of Brexit negotiations.

The prime minister is under pressure from financial markets, business leaders, government colleagues and a cross-party group of lawmakers after she set out her vision of how Britain will exit the 28-nation bloc. May’s pledge to restrict immigration is increasingly seen by investors and fellow EU governments alike as incompatible with continued U.K. access to the single market, posing a risk to the economy.

That realization has sent shock waves through markets and pushed the pound to its biggest weekly loss since the Brexit vote in June. Sterling resumed its decline on Monday, and was down 0.2 percent as of 10:35 a.m. in London.

“The U.K. is really shooting themselves in the foot and it is going to get ugly,” Nouriel Roubini, professor of economics at the New York University Stern School of Business, said at an event in Washington on Sunday. “The risk is not that the U.K. has a recession of two-three quarters; the risk is that the U.K. will stagnate at 1 percent growth for the next five years,” Roubini said. Then, “those that voted for Brexit are much worse off.”

The political shock waves from the signals out of last week’s Conservative Party conference mirrored the market tremors that reverberated around the globe. The Observer newspaper reported that former Labour Party leader Ed Miliband held talks with pro-EU Conservative lawmakers on forming an alliance to demand the government allow a parliamentary vote on the terms of Brexit. Miliband is considering pushing for May to appear before Parliament to explain the body’s role in EU-exit decisions.
Credits: Bloomberg.com