Yahoo Finance Pound falls on report UK government could quit Brexit trade talks next week
The pound slid on Wednesday, after a report that the UK government could pull out of Brexit talks as soon as next week if not enough progress has been made towards a deal.
Sterling had lost 0.8% against the dollar (GBPUSD=X) by mid-afternoon in the UK, trading just below $1.29. It shed 0.7% against the euro (GBPEUR=X), with the pound selling for $1.09.
The flight from sterling reflects investors fears’ Britain could face severe economic upheaval if no deal is reached. It would likely spark disruption and sudden new barriers to long-standing trade and other ties with most of Europe when the Brexit transition period expires at the end of the year.
Talks between negotiators are ongoing in London this week. The pound’s decline came after a source told Bloomberg the UK government was serious about threatening to walk out of talks over a trade deal next week.
READ MORE: Stocks mixed as US stimulus hopes endure despite Trump ditching talks
Last month UK prime minister Boris Johnson set a deadline of 15 October for reaching an agreement, in order for it to be signed off and put into place by the start of next year.
Meanwhile Britain’s chief Brexit negotiator David Frost told MPs on Wednesday that barriers had not yet been overcome on one of the key stumbling blocks of state aid policy, according to Reuters.
WATCH: Boris Johnson says he can live with a no-deal Brexit
"I feel we're some way from a deal at the moment, if I'm honest, but we are at least having a decent discussion of this, you know, what is possible and what isn't possible,” he said.
Ireland’s foreign minister Simon Coveney also said on Wednesday that a “landing zone was hard to envisage” at present on another thorny issue, fishing rights.
"This is a big obstacle and I don't think the British government should underestimate the strength of feeling on fishing of many of the Atlantic member states," he said.
Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said fishermen’s demands on either side of the Channel “risk skewering a Brexit deal,” hitting sterling on Wednesday.
“Throughout the Brexit process, flotillas of British boats have made regular protest appearances, demanding priority catches for the fish in UK waters. But the EU’s determination not to throw the Common Fisheries Policy completely overboard, and instead netting continued access for its boats, is casting serious doubts that a trade deal will be reached,” she said.
“The EU stance appears to be hardening, leading to speculation that negotiations will now be forced to extend into November.”
Any concessions by either side are likely to “cause a stink for domestic politics,” but negotiators will be “highly conscious” of the economic damage from failure to secure a deal, she added.
READ MORE: UK and EU agree to ‘intensify talks’
