The pound fell after the Conservatives announced that Boris Johnson was set to lead the party, with business leaders telling the new leader that it was time “to get down to business.”
The British Chambers of Commerce told Johnson, who beat rival Jeremy Hunt with 66% of the vote, that the time for campaigning was over.
“Companies need to know, in concrete terms, what your government will do to avoid a messy, disorderly Brexit on 31 October — which would bring pain to communities across the UK and disruption to our trade around the world,” said director general Adam Marshall.
After a bruising morning for the currency, the pound fell 0.15% against the dollar (GBPUSD=X), to $1.245, after recovering slightly earlier on Tuesday.
In a speech immediately after his victory, Johnson indicated that he was hoping to avoid a clash with the European Union.
He noted the UK’s “deep desire for friendship and free trade and mutual support in security and defence between Britain and our European partners” and contrasted it with the desire “for democratic self-government in this country.”
While investors have been bracing for swings in the value of the pound, analysts contend that the currency is already trading at “crisis levels,” with most of the present risk of a no-deal Brexit already built into its value.
Congratulations to Boris Johnson on becoming the new Prime Minister of the United Kingdom. He will be great!— Donald J. Trump (@realDonaldTrump) July 23, 2019
“While we acknowledge that a no-deal Brexit is a risk and would very likely record new lows in the pound, we do not expect the market to assign a higher hard Brexit premium than previously or until parliament returns after the summer break in September,” said Jordan Rochester, a strategist at Nomura.
Banking, insuring, and money management lobby group TheCityUK said on Tuesday that its industry would be “essential” to the UK’s post-Brexit prosperity, noting that Johnson would “not need to be reminded” that it was the UK’s largest taxpayer and an employer of 2.3 million people.
“Love him or loathe him, Boris Johnson’s elevation to the highest office in the land is unsurprising,” said Philip Smeaton, chief investment officer at Sanlam UK.
“Despite his convincing victory among Conservative Party members, he now has to put his punchy rhetoric into action and deliver Brexit by 31 October, ‘do or die’.”
“Johnson’s views on Brexit and other policy areas have been well publicised over many years and markets have had time to consider and price in his policy proposals,” said Smeaton.
But the post-result boost followed a difficult morning for the pound, which fell below Monday’s lows earlier on Tuesday.
“The broad downtrend since March remains very much the dominant force, although we are a little above the two-year lows hit last week,” said Neil Wilson, the chief market analyst at Markets.com.
Investors, however, will be examining the composition of Johnson’s cabinet closely.
While the effect of his leadership has already been “priced in”, Wilson noted that the leadership election was “not just a new leader, but an entire new regime.”
“The content, tone and emphasis from Number 10 will be very different to what we had under May.”
The Institute of Directors, which counts among its membership over 30,000 directors of UK companies, said a no-deal Brexit would have the potential to “distract” from the difficulties already facing industry in the UK.
“The UK faces long-term skills challenges that have contributed to stalling productivity growth across sectors and regions. Firms are crying out for infrastructure upgrades, while high costs and uncertainty are often stalling their own investment plans,” it said.