Daily Management Review

KPMG says Nothing Good for the Pound Offered by Brexit


10/21/2016




KPMG says Nothing Good for the Pound Offered by Brexit
The U.K. chairman at KPMG said that amid uncertainty over when the U.K. will leave the European Union (EU),, the pound will remain volatile.
 
"There's nothing sort of implicitly good for the pound at the moment, and there's volatility," Simon Collins said on a television interview.
 
"What we're telling our clients who are sterling denominated, at the moment, is we think sterling is a little bit undervalued, but don't expect it to stop being volatile anytime soon,” he said.
 
Reuters data showed that the pound tumbled from as high as $1.5018 to as low as $1.1450 earlier this month in the wake of the U.K.'s June 23 referendum vote to exit the EU. In 1985 the pound neared parity with the U.S. dollar amid an acrimonious miners' strike in the U.K. and the present fall marked sterling's lowest level since 1985.
 
The lack of Brexit negotiations as of yet has heightened the uncertainty, Collins noted.
 
Reuters reported that with multiple EU leaders saying that they wouldn't begin negotiations until Article 50 was invoked, France's President Francois Hollande told U.K. Prime Minister Theresa May to expect tough negotiations at an EU summit on Thursday.
 
Reuters reported that plans to formally notify the EU on Brexit at the end of March is being made by the UK, May has said.
 
"Until then, everybody's positioning, but nobody can negotiate," Collins said.
 
Pointing to a survey of 100 CEOs that KPMG published last month, he said that amid an uncertain environment that may drag on for years, companies are left engaging in "sensible contingency planning".
 
"Two-thirds of them said they were very confident about the U.K.'s prospects and they were contemplating M&A, joint ventures and alliances. But three-quarters of them also said that as part of sensible contingency planning, of course, they were looking at potential escape routes, whether in terms of some operations relocating, or indeed, in some instances headquarters relocation," ," Collins noted.
 
The referendum had impacted its sales in the U.K., said Tai Alegbe, a founder of U.K. online specialist wine marketplace Baacco, told CNBC's "Squawk Box”. To compensate for increased import and distribution costs in the wake of the pound's drop, Alegbe noted that he expected merchants that his company works with would begin making larger orders.
 
While saying that a final decision will depend on the agreements that the U.K. government negotiates, he noted that looking ahead, his company hopes to expand to new markets, including within Asia, within the next year.
 
Others noted the uncertainty over Brexit wasn't likely to ease anytime soon.
 
Noting that the roadmap was far from clear Antonio Fatas, professor of economics at Insead, told CNBC's "Street Signs” on Friday: "This is an extremely complex negotiation."
 
"After [the Brexit referendum in June] there was no clear path of where the U.K. wanted to go," he said. "I think it was a clear message, 'this is what we don't want,' but it was not clear among the voters, it was not clear among the government, this is what we want to replace it. And now they're trying to figure out what that is, but what that is requires the European partners to agree."
 
(Source:www.cnbc.com) 






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