The economic arguments for and against Brexit in the course of the referendum campaign were quite esoteric and confusing to the average voter. Similarly, sterling’s decline in the currency markets might seem like the kind of thing that only concerns City traders.
So the row that has broken out between Tesco, Britain’s biggest supermarket chain, and Unilever, the Anglo-Dutch multinational, has made the story concrete in ways that were not apparent before. Unilever wants to raise prices across a range of goods to reflect the fall in the pound, which has dropped from around $1.50 on the day of the referendum to less than $1.22 at the time of writing. Similar falls have been seen against the euro; indeed travellers who change their money at the airport are getting less than a euro per pound.
But as Mr Krugman says, Britons are still poorer. Brexit means not just Brexit but higher prices.
Some will cite the 1992 example, when Britain left the Exchange Rate Mechanism, as showing that a weaker currency can be a good thing. But the great boon of 1992 was that it allowed the Bank of England to cut interest rates from their sky-high 12% levels. There is not such scope now (indeed, Brexiteers complained about the quarter point cut the Bank did make). Nor did the pound seem to be overvalued before the referendum vote either on our Big Mac index or, more scientifically, on the OECD’s measure of purchasing power parity, which suggested $1.43.
