Fall in sterling is a welcome change, says Mervyn King

The collapse in the value of the pound since Britain voted to leave the EU has been described by Mervyn King, former governor of the Bank of England, as a welcome change.

Lord King, who ran the Bank during the 2008 banking crisis, told Sky News: “The economy was slowing somewhat before the vote and we are in a position where the rest of the world is not offering us much help.

“So, from that point of view the fall in sterling is a welcome change.”

His successor at the Bank, Mark Carney, has called for an investigation into last week’s “flash crash” in the pound, which dramatically slumped on Friday to just below $1.15 – its lowest level since March 1985 – before jumping again in a matter of minutes.

Carney asked the Bank for International Settlements, which represents the world’s central banks, to review the events which took pace in the early hours of trading in Asia on Friday.

King, who left the Bank in 2013, said shortly after the EU referendum that he had been baffled by a warning that there would need to be an emergency budget in the event of Brexit.

Commenting on the pound’s sharp moves since the vote, he told Sky on Monday: “The whole thing has generated reactions which are over the top.”

Some economists argue that a fall in the pound could force the UK economy to rebalance towards more exports because British products become more competitive on overseas markets when the currency is weaker.