David Davis: Pound plummeting under a no-deal Brexit 'might not be such a bad thing'

Monday 11th February 2019 11:00 GMT

The former Brexit secretary called on the government to deliver a "pro-business, pro-trade, pro-environment" exit from the EU, suggesting Chancellor Philip Hammond could cut taxes and increasing spending in a special no-deal spring budget.

Referring to predictions that sterling could plummet if Britain leaves at the end of March without an agreement with the EU in place, Mr Davis said: "Analysts predict that in the event of no deal, sterling could fall by over 20%. Is this such a bad thing?

"Our goods will become 20% more competitive on the global market and our EU competitors' goods would be less competitive."

A fall in the value of pound could push up inflation, which could mean everyday goods becoming more expensive and household budgets being squeezed.

But companies that export around the globe would find their goods would become cheaper in those markets.

Mr Davis, who was writing for The Times Red Box, said government and businesses should focus on the "possibilities" of Brexit.

Otherwise, there was the risk of "doom-laden talk" becoming a "fait accompli", he added.

He highlighted a "doom-laden" forecast from the Bank of England, which last week downgraded its growth prediction for 2019 from 1.7% to 1.2%.

Mr Davis said Bank governor Mark Carney "exemplifies an Establishment culture of seeing Brexit as a huge problem to be ameliorated rather than a once-in-a-generation opportunity which offers a prize and could reap massive rewards".

Under the two-year Article 50 process, triggered by Prime Minister Theresa May in March 2017, Britain will leave the EU with or without a deal at the end of March.

If no agreement is in place, Britain will revert to trading with the bloc under World Trade Organisation rules, something opponents say would damage Britain's economy as it would mean tariffs on goods.

But Mr Davis referenced Project After, a purported plan by civil servants for tax cuts and tariff reductions in the event of no deal, as evidence of the "huge opportunities" such an outcome could offer.

"This could include cuts in VAT and corporation tax, a variety of tax reliefs to boost spending, and a wider review of the UK's regulatory regime after we leave the EU," he said.

The former Brexit secretary quit his job last summer in protest at Mrs May's Brexit deal, which he feels keeps Britain too closely linked to the EU.

His former cabinet colleague Boris Johnson, who resigned as foreign secretary around the same time, was asked about Mr Davis's sterling comments during an appearance on BBC Radio 4's Today programme.

"The pound will go where it will," Mr Johnson said.

Now On Air
More Music on Coast FM
More music on Coast FM