The UK’s exchange rate has been the bane of many a government. In 1967 Harold Wilson was forced to devalue sterling with a balance of payments crisis, giving his famous “pound in your pocket” speech to a nation now convinced of Labour’s economic incompetence. In September 1992, just after John Major had shocked the country by securing another term in office for the Conservatives, he was forced to pull sterling out of the European Exchange Rate Mechanism, leading to “Black Wednesday”, which cost the UK £3.4bn.
After a decade of stability before the crash, the newly volatile pound is today centre stage again. Last week, John McDonnell hit back against warnings from the City that a Labour government would lead to a collapse in the pound. Labour’s plans to strengthen the British economy, rebuild its manufacturing base and promote long-term investment would instead “see… sterling strengthening”, he claimed.
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