British pound drops to lowest since 1985 as Theresa May to outline Brexit plan

The British pound falls to its lowest since 1985 after speculation ramps up that British Prime Minister Theresa May will lay out her plans for a so-called "hard Brexit" from the EU to European lawmakers tomorrow.
At one point on Monday, the British pound was changing hands at less than $1.20 US. (Alastair Grant/Associated Press)

The British pound fell to its lowest since 1985 on Monday after speculation ramped up that British Prime Minister Theresa May will lay out her plans for a so-called "hard Brexit" from the EU to European lawmakers tomorrow.

Sterling touched as low as under $1.20 US per pound on Monday, its lowest level since 1985. In Canadian dollar terms, that's roughly $1.59 Cdn per British pound.

The catalyst for the swoon is May's plan to disclose details in a speech Tuesday of how specifically Britain will leave the EU. Her office says she will call for a "global Britain" open to the world.

British media say she'll signal a willingness to take the U.K. out of the EU's single market in goods and services in order to gain control over immigration. That prospect alarms many in Britain's huge financial services sector, which relies on EU access.

Since the June vote, suspicion has grown that the Tory government wouldn't follow through on the plan, or would at least water down the dissolution to retain many economic liberties such as free trade within Europe.

Not so bad after all?

But there's a contrarian economic view developing that a Britain outside the EU could come out ahead financially in the long run.

Philip Hammond, May's Chancellor of the Exchequer — Britain's equivalent of the finance minister — said over the weekend that a Britain free of the EU could be come a de facto tax haven, and attract many European businesses to relocate due to lower and much more favourable corporate taxes as a result.

And there are also signs from the other side of the Atlantic that a major trading partner would be happy to work with a fully sovereign British economy.

"U.S. president-elect Trump's comment over the weekend that he would be open to the idea of having a trade deal with Britain — 'we're gonna work very hard to get it done quickly and done properly' — is probably emboldening her stance," BMO economist Jennifer Lee said.

British Prime Minister Theresa May is set to reveal details on how Britain plans to exit the EU tomorrow. (Jack Taylor/Press Association/Associated Press)

With files from The Associated Press