The president of the European Central Bank, Mario Draghi, has told EU leaders that companies have to increase their preparations for a possible no-deal Brexit. Mr Draghi’s comments came the day after EU leaders agreed at a summit in Brussels to give Britain a final chance to leave the bloc with a deal, extending the Brexit deadline by two weeks to April 12 from March 29.
“Authorities and central banks are prepared but the private sector has to step up preparations,” Mr Draghi told the European summit.
In the case of a no-deal Brexit, trade between Britain and the EU would face immediate trade barriers and restrictions on business. Mr Draghi said the negative consequences for the 19-country eurozone would be limited, but he acknowledged that some countries were more exposed than others. Ireland, France, Germany, Belgium, and the Netherlands are among EU countries with large trade flows with Britain and they are likely to feel more of the pain of a non-negotiated Brexit.
Mr Draghi also told EU leaders that the eurozone economy is still facing “protracted weakness and pervasive uncertainty” but risks of a recession remain “quite low”.
Sterling rallied yesterday, helped by a weaker euro and after EU leaders gave British prime minister Theresa May a two-week reprieve to decide how Britain will leave the EU.
Disappointing economic survey results in both the eurozone and the US raised volatility across currency markets and added to the pound’s gains. The biggest loser was the euro as investors grew increasingly concerned about the outlook for the global economy. Sterling had plunged on Thursday in its biggest one-day fall of 2019 as fears mounted that Britain would crash out of the EU on March 29 without a deal.
The EU has said Britain can have a short delay to Brexit, as requested by Ms May, but she must first win parliamentary approval for her withdrawal deal.
EU leaders have described the two-week extension as a last chance for Britain to secure an orderly Brexit.
The pound was up 0.6% at $1.3188, while its gains versus the euro were as high as 1.5% to 85.49 pence. The gain was largely on the back of weakness in the single currency following disappointing data out of Germany.