Chancellor of the Exchequer Sajid Javid leaves 10 Downing Street in central London after attending the weekly Cabinet meeting on 29 October, 2019 in London, England.
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Sterling dipped sharply against all of its main trading peers on Monday, as traders reacted to weekend Brexit comments from U.K. Finance Minister Sajid Javid.
In an interview with the Financial Times published on Friday, the chancellor warned U.K. businesses that the government would remain committed to as hard a Brexit as possible and that it would not seek regulatory alignment with Brussels.
“There will not be alignment, we will not be a rule-taker, we will not be in the single market and we will not be in the customs union — and we will do this by the end of the year,” Javid said.
As markets woke Monday, sterling slipped by around 0.2% versus the greenback and 0.3% versus the euro. The pound has been losing value of late as poor economic data has taken the shine off the strong Conservative Party election win in December.
In a note Monday, Societe Generale’s Kit Juckes said many traders were still backing the pound, despite also pricing in a 70% chance that the Bank of England will cut rates later this month.
“With so many longs, and unemployment data tomorrow and PMI (purchasing managers’ index) on Friday, sterling remains on the back foot, sterling is vulnerable,” said Juckes.
The U.K. will leave the EU by the end of January where it will enter a transition period during which a new trading relationship with the EU will be settled.
The largest body representing the interests of U.K. businesses is the British Chambers of Commerce (BCC). Following Javid’s comment that there will be no regulatory alignment with the EU after Brexit, BCC co-Executive Director Claire Walker said the government must be careful not to drive employers away from Britain.
“Our business communities have differing views but are prepared to be pragmatic about coming changes to regulation. Uncertainty around the extent of divergence risks firms moving their production elsewhere,” said Walker in a statement Saturday.
The BCC is also calling on the government to provide additional support to help firms adapt to new rules.
The auto industry is a big employer in the U.K. but heavily dependent on the smooth transport of parts and completed cars between the EU mainland and the U.K.
In an email to CNBC Monday, the chief executive of the Society of Motor Manufacturers and Traders (SMMT), Mike Hawes, said that additional regulations could “add billions” to the cost of developing cars in Britain for sale in Europe.
“It is important, therefore, that we have early sight of the details of the government’s ambitions so we can evaluate any impact on our competitiveness and the future of volume manufacturing in the U.K.,” he added.