Pound shoots up as Davis says UK could pay for single market access

Jasper Jolly
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Financial contributions to the EU were a major issue for the Leave campaign in the referendum (Source: Getty)

The British pound rose sharply to break $1.26 after Brexit secretary David Davis said in a speech the UK may continue to pay money into the European Union budget in order to preserve Single Market access.

The pound/dollar spot exchange rate had opened the day at $1.2506, but rose sharply this morning to reach intraday highs of $1.2650 – a rise of over one per cent. In late afternoon trading in the UK, it settled at $1.2618.

Against the euro the pound spot exchange rate strengthened briefly to above €1.19 – the first time since 7 September – before paring some of those gains at the time of publication to €1.1897.

Davis, the secretary of state for exiting the EU, was asked whether the UK will make contributions to the EU after leaving.

Read more: Brexit secretary: UK could pay EU for Single Market access

He told Parliament: “The major criterion here is that we get the best possible access for goods and services to the European market and if that is included in what he is talking about, then of course we would consider it.”

A deal to retain access to the single market could potentially allow UK businesses to continue without major upheaval in operations, which business leaders from multiple sectors have been lobbying to avoid.

“If there is some way to cobble together an agreement that would be a big boost,” said Michael van Dulken, head of research at Accendo Markets.

“It implies a ‘soft’ Brexit rather than a ‘hard’ which would make it easier for business.”

Read more: Carmakers have warned Brexit will ramp up car prices

However, any deal which involved continued payments to the EU would be deeply controversial, after the money spent on EU membership was a central part of the Leave campaign before the referendum.

The pound had fallen in value against the dollar after the election of Donald Trump as the next US President, but has regained strength gradually in choppy trading over the last two weeks.

It was further boosted yesterday by Opec’s historic agreement to cut production.

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