On the road to a sterling crisis with a 'hard' Brexit

Washington

THE United Kingdom has been no stranger to wrenching sterling crises in the post-war period; indeed, it experienced such turmoil in 1967, 1976 and 1992. This makes it all the more difficult to understand current complacency in British academic and policymaking circles surrounding the likely fallout from a "hard" Brexit - particularly at a time when Britain is suffering from acute external vulnerabilities that are heightening the prospects of yet another sterling crisis.

An indication of the UK's external vulnerability is its gaping external current account deficit, now running at a staggering 6 per cent of GDP - the largest deficit the country has seen in the post-war period. As Mark Carney, the Bank of England (BOE) governor, has put it, the deficit's size makes Britain uncomfortably dependent on the "kindness of strangers" for its financing.