.
AT the close of business last Thursday, the Pound Sterling had fallen in value for 13 days in a row.
In a parting snub to Theresa May, the currency steadied on Friday after the British Prime Minister announced the date of her resignation. Further falls can be expected, however., in what appears to be a slow but steady slide.
In the short-term the problem is uncertainty.
Mrs May will stand down on June 7 and the process to elect a new leader will officially begin on June 10.
If there are a lot of candidates – which currently seems to be the case – it will be a lengthy elimination process, with MPs voting to reduce the list to two and then handing the decision to party members.
Conservative Party officials reckon they will have a new leader by the end of July, others estimate that the process will last into August.
Either way, it is a long time for Britain to be, in effect, leaderless – although many would say that has been the case ever since the Brexit referendum.
But the real worry for Sterling is in the longer term. The new leader is likely to be a more ardent Brexiteer than Mrs May.
If he or she threatens to take Britain out of the EU without a deal, the UK’s currency could be in for a rough ride. Its prospects look even less certain if the new leader should actually carry through on that threat.
“The Bank of England may soon have to navigate the economy through even choppier political waters,” Paul Dales, UK chief economist at Capital Economics, told the BBC.
And he wasn’t just referring to Britain’s currency. The yield on the UK 10-year gilt fell to 0.95% on Friday, as chances rose that the Bank of England would cut British interest rates to help insulate the British economy from the damage of a hard Brexit.
The markets are betting on a rate cut before the end of this year.
All this is a cause of great concern to anyone trading with Britain and, of course, to British expats here in Cyprus who may have investments in the UK or who rely on a strong Sterling to maintain the value of their pensions.
It is possible, but difficult, for businesses to hedge against currency fluctuations.
They can calculate when, for example, sale and delivery of goods to or from the UK becomes unprofitable, or when it is wise to spend in the short term for longer term financial gain.
If you do not feel confident about which strategy is best for you, your family or your business, then it is time to seek professional help.
And that is even more true for holders of private pensions. It may be possible to transfer your pot to a fund outside the UK – but will the move be profitable? The rules on transfer are complex and the gains are not always clear.
Again, I strongly advise taking professional advice. I have, let me say, a direct interest here. My company, the Woodbrook Group, is an international firm of financial advisers and will be very happy to offer our services.
Our team of highly experienced consultants can help you with solutions tailored to your unique situation in these unsettled times.
All of the options surrounding Brexit throw up problems. We can’t solve them all, but we can help you steer a course that will keep your finances sound and your future positive.
