Sterling’s fall is nothing to fear

Brexit unsurprisingly dominated the news again last week, especially its continued downward impact on sterling. As the referendum nears, we expect to see further falls in the pound. However, this should not be viewed as an entirely negative development, as the much longed-for rebalancing of the economy probably requires a significantly lower exchange rate.

More generally, we think that estimates published by various commentators recently suggesting a big negative short-term hit to the economy from Brexit are overdone. Admittedly, the net impact would probably be negative. But we think that growth would be only a bit lower this year and next than would otherwise have been the case.