Crunch time again for Theresa May as the threshold for a no-confidence vote in Theresa May is reached

After several months of trying, the Conservative rebels have finally made it to 48 letters of no-confidence in Theresa May. The wheels are now moving very quickly on the process. The vote will likely be later today/tonight but we’ll be getting headlines aplenty from now on.

If May wins the vote, she carries on and no new leadership challenge can happen for 12 months. In one sense that’s good for the pound because it removes a heap of uncertainty. If May loses, she resigns as head of the party but remains as PM until she is replaced. That will allow her to potentially continue negotiating Brexit. She needs over 50% of the vote to remain in place. If she wins, that’s positive for GBP.

A leadership contest will follow and the names in the hat will be whittled down by repeated knock-out votes until only two remain (assuming there’s more than two people putting themselves forward. These votes are usually done in secret. At the end, we’ll have the next leader of the Conservative party.

What will matter to the pound is obviously who that person will be and how they lean on Brexit. There’s three scenarios;

  1. An extreme leaver – Bad for GBP as that raises the odds of a no-deal
  2. An extreme remainer – Good for GBP as it would lean towards no-Brexit or a second referendum
  3. A moderate – That might not change things much and it could actually mean we’re still in the situation we were with May – For the pound, it would continue as it is now

One other thing to throw in the pot would be how any new leader wanted to conduct negotiations. We could have delays in Article 50, arguments about what has already been agreed, fresh fights with Europe. It could all get even more messy than it is now, whoever is in charge. Once again we’ll have a whole new batch of uncertainty, and that’s more likely to weigh on GBP than help it.

For what it is worth, I think May wins the vote. For one thing, the length of time it’s taken these folks to get their 48 letters isn’t indicative of a wholesale willingness to oust May. It’s also not good for the party as a whole as whoever might become the new leader might walk straight into a full government no-confidence vote brought by opposition parties. That could mean a general election and yet more Brexit delays and uncertainty. I think that fear is too much for many in the Conservative party, so although they may not agree with or privately back May, they’ll stick with her just to get through this mess, and then perhaps we might start to see a soft no-confidence vote where May is offered sweetners to resign. We could find that May resigns by herself once/if a Brexit deal passes in Parliament. So, even though she might win the vote, she might still not be leader through the rest of Brexit.

Lots of twists and turns to come, just when you thought they couldn’t get any more twistier and turnier.

 

 

Ryan Littlestone
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