U.S. Markets closed

Boris Johnson Won’t Back Down on Brexit Despite Plunging Pound

Jessica Shankleman and Alex Morales
Boris Johnson Won’t Back Down on Brexit Despite Plunging Pound

(Bloomberg) -- Prime Minister Boris Johnson refused to back down over his threat to take the U.K. out of the European Union without a deal, despite a growing backlash over the impact his strategy is having on the pound.

Johnson’s office hinted on Tuesday that another round of Brexit talks might not happen at all, and has warned he won’t meet EU leaders for negotiations unless they agree to tear open the current divorce accord.

The pound is headed for its worst month since October 2016, when then Prime Minister Theresa May announcing her intention to trigger divorce proceedings with the EU. This time it’s Johnson worrying investors, with his tough stance on the Brexit deal leading market participants to up the chance of no deal.

Opposition politicians accused Johnson of harming family finances with his no-deal Brexit stance, at a time when many voters will notice the financial hit on holiday overseas.

Some Conservatives privately expressed anxiety over the slide in sterling. But others -- including inside Johnson’s top team -- were defiant. One senior official said the markets were now waking up to the realistic prospect of a no deal exit on Oct. 31 and that the government was not about to soften its tone.

The markets have not properly priced in a no-deal Brexit until now, said the official, who asked not to be identified talking about currency movements. Robert Halfon, a Conservative member of Parliament, said the fall in the pound could benefit exporters and help British tourism. “Hopefully holiday makers will choose GB as a holiday destination,” he said.

Definitely Leaving

Johnson has repeatedly said he’ll take the U.K. out of the EU on Oct. 31, with or without a deal, and has instructed government departments to step up their preparations for crashing out of the bloc on Halloween.

Johnson is traveling the country seeking to build support for his hardline position on a new Brexit deal, and will travel to Northern Ireland for talks with political party leaders about restoring the region’s government Wednesday.

Speaking during a visit to a farm in Wales on Tuesday, Johnson said it’s “up to the EU” to compromise on a Brexit deal and avoid Britain leaving the bloc without an agreement.

‘Their Call’

“If they can’t compromise, if they really can’t do it, then clearly we have to get ready for a no-deal exit, and I think we’ll do it,” Johnson said in a pooled TV clip. “It’s up to the EU, it’s their call.”

Six days after becoming premier, Johnson finally spoke to Irish premier Leo Varadkar and reiterated his demand to scrap the controversial backstop provision in the withdrawal agreement. The backstop is a legal guarantee intended to ensure there’s no need for checks on goods crossing the land border with Ireland. Varadkar repeated that the agreement cannot be reopened.

Politicians from all sides of Parliament opposed to a no-deal Brexit say the plunge in the pound is a taste of what’s to come if the government continues to double down on its hardline strategy.

They warned holiday makers abroad would feel the hit of Johnson’s move to fully embrace the prospect of crashing out of the EU.

‘Reckless’

“Johnson and his ministers’ reckless threats of a no deal are hitting pockets,” said John McDonnell, economy spokesman for the opposition Labour party.

The Treasury declined to comment on the currency move. Other Tory MPs were privately expressing concerns that the pound will continue its decline throughout the summer as long as the government continues to threaten a no-deal split.

Vince Cable, the former Liberal Democrat leader who is traveling to Greece on Wednesday, said he was concerned the pound will fall further as traders wake up to the prospect of a no-deal exit in three months’ time.

“The markets already factored it in to some extent, but the potential for a continuing fall in currency is all too apparent,” he said.

(Updates with latest pound move.)

--With assistance from Charlotte Ryan.

To contact the reporters on this story: Jessica Shankleman in London at jshankleman@bloomberg.net;Alex Morales in London at amorales2@bloomberg.net

To contact the editors responsible for this story: Tim Ross at tross54@bloomberg.net, Stuart Biggs

For more articles like this, please visit us at bloomberg.com

©2019 Bloomberg L.P.