Tory plot to oust Theresa May could send pound plunging, economists warn

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Moves against Theresa May at the Tory annual conference risk putting further pressure on the pound, which could fall even further against the euro, experts warned today.

They raised the concerns as millions of holidaymakers who headed to Spain, France and other eurozone countries this summer discovered that sterling’s weakness meant their holiday cost considerably more than before the Brexit vote last June. Airport bureaux de change have been offering as little as  0.87 for £1 and fears are growing that the rate could get even worse.

Kathleen Brooks, research director for City Index, told BBC radio: “We think the pound could struggle versus the euro into October, when we’ve got the Tory party conference and the threat of Theresa May being ousted.

“If that goes smoothly we could see the pound start to recover but maybe not until into autumn.”

There are also worries that sterling could fall even further against the euro before the Tory conference in Manchester, which starts on October 1.

The pound has lost around a fifth of its value against the euro since the Brexit referendum.

It has dropped more recently due to stronger economic growth in the eurozone and greater political certainty after Emmanuel Macron’s win in the French presidential elections and Angela Merkel seeming on track to be re-elected German chancellor next month.

In contrast, GDP growth in the UK weakened to just 0.3 per cent in the second quarter of the year, it was confirmed today, with millions of households facing a living standards squeeze and Brexit uncertainty also dampening business investment. 

Jeremy Cook, chief economist at currency firm World First, warned of possible further weakness for the pound.

“It depends on how sterling trades today and over the course of the next couple of days, but we could be at the worst level for sterling ever,” he said.

Ministers have published a series of position papers on Brexit in recent days, including one on data protection today, as they seek to push the EU into agreeing to start talks on a trade deal in October. However, they have failed to impress Brussels with the details of the proposals. “The solution proposed by London on customs and the Irish border sounds like a fairy tale,” said one diplomatic official.

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