Last night saw Theresa May’s Government suffer a massive defeat in the House of Commons over her Brexit deal. Vincenzo Ferrara looks at what the vote potentially means for UK business.
On the evening of January 15, 2019, UK Prime Minister Theresa May lost the meaningful vote on her Government’s EU withdrawal agreement by a margin of 230 votes.
May has now been given until Monday 21 January to present the house with a plan B or face a vote of no confidence – possibly leading to another general election, which isn’t an ideal situation with the Brexit deadline looming ever closer, due to take place on March 28.
Despite all of the uncertainty and political unrest, GBP rose by approximately one and a half US cents in response to last night’s vote.
“It appears the British government is currently in brinkmanship mode,” said Nigel Green, founder and chief executive of deVere Group. “Mrs May says she is not ‘running down the clock’ to the deadline of March 28, but in all likelihood, she will be re-submitting her Brexit plan with only a few minor tweaks, and so taking up government and parliamentary time that could perhaps be spent exploring other options that can command more support from MPs. In all probability, the Government will seek an extension to Article 50.”
Mrs May doesn’t want to be the Prime Minister who takes the country into a chaotic no deal Brexit on March 29.
“The longer the Brexit process is extended, the less chance of a no deal and greater chance there is of a second referendum that will reject Brexit, or a soft Brexit. This will please global financial markets and favour the pound and UK financial assets,” Green added.
Following the leader of the opposition Labour party, Jeremy Corbyn’s tabling of a vote of no confidence, there is greater chance of a general election. But in normal times this would spook the markets and have a directly negative impact (in the short-term at least) on the pound, the FTSE and UK financial assets generally.
“But these are not normal times, and the DUP and Conservative MPs who vote against the Government’s Brexit bill are unlikely to vote against the Government. A general election seems a low probability outcome.”
As the uncertainty rumbles on, the outcome of what could happen at the end of the month seems unsteady, let alone what could happen by the end of March. For now, the best strategy is for businesses to play it safe and for major investors to diversify their portfolio strategies. An extended deadline, a new PM and even a withdrawal from Brexit still seem like possibilities at a time when we should really have a clear set of Brexit guidelines – particularly for UK businesses to work towards.
The ups and downs of the pound will continue to cause headaches for British companies of all sizes and the future of Britain being in the EU is as ambiguous today as they have been since the referendum took place back in June 23, 2016.