Foot and Mouth Disease Hits the UK, What This Means for the British Pound

August 4, 2007

Foot and mouth disease has been discovered in the UK once again. The last time this epidemic hit the country was back in 2001 when the government was forced to slaughter 10 million animals. They have now suspended exports of meat and dairy in an attempt to control the situation and to avert economic disaster.

How bad can this get?

In 2001, the breakout of FMD forced the country to not only slaughter animals, but also cancel sporting events and postpone the general election. On a broader scale, British meat was shut out of the international markets and tourism was seriously affected.
The crisis at the time was estimated to have cost Britain as much as 10 billion pounds (or $16 billion USD at the time). Between spring and summer of 2001, when the disease hit, the British pound fell from 1.4750 down to a low of 1.3680.

The US and Japan have already banned the imports of British meat in reaction to the outbreak. The EU is expected to announce a similar ban when they meet on Monday.

With the British pound trading at such a high level, the recent FMD breakout is certainly going to take some steam out of the recent rally.

Bloomberg has a good article on the previous economic implications of FMD.

Here is a Wikipedia description of Foot and Mouth disease.

Posted in British Pound, Foot and Mouth Disease, Forex, UK, Uncategorized