The UK car industry has seen a reduction in new investment of over half as the topic of Brexit has caused huge uncertainty for the industry. At the moment the automotive industry has urged Theresa May to keep the economy in the EU’s customs union. The Sterling report below discusses how economic uncertainty can impact the Pound, the table below shows the range of exchange rates during the past 30 days displaying the difference in returns you could have achieved when buying a number of currencies.
|Currency Pair||% Change||Difference on £200,000|
Investment in the first half of 2018 is down to £347mn compared to the same period in 2017 which was £647mn. The current arrangement for the industry means that trade between EU members is duty free so if we are to leave this could cause a huge problem for the car industry.
At the moment the Brexit talks are ongoing and this is causing a huge concern as no deal has yet been done.
At the moment the deal is set to be finalised by October which would allow enough time for the deal to be ratified by March 2019 and the uncertainty has caused a huge lack of investment. Indeed, one major concern is that the average car has a total of about 30,000 components which are sourced from various different countries across the globe.
Incoming Bank of England member Jonathan Haskel who will be replacing Ian McCafferty who recently voted for a rate hike will be joining the MPC in September.
Haskel is seen as a lot more dovish then McCafferty and this could potentially put a future rate hike in doubt. Haskel has suggested that there is wage growth is not consistent enough and this has caused the Pound to remain under pressure.
There are certainly arguments in favour of raising interest rates as inflation still remains too high, retail sales have shown a huge increase recently and unemployment close to historic lows. However, as McCafferty will be leaving and being replaced by a more dovish member I think an interest rate hike may still be a way off.
The EU summit will be the next stumbling block for the Pound as the topic of Brexit will be one of the hot subjects of the debate. With Theresa May only just managing to get the terms of the EU Withdrawal Bill agreed last week and with over 100,000 people marching in London to protest about not being able to have a vote we could be left in further limbo at the summit.
For more information on how future data releases could affect your currency requirement, call our trading floor on 01494 725 353 or email me here.
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