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;
- An extreme leaver – Bad for GBP as that raises the odds of a no-deal
- An extreme remainer – Good for GBP as it would lean towards no-Brexit or a second referendum
- 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.
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Hi Ryan, is the leadership contest public, perhaps possible to follow ? Thanks….
Hi Ryan, nice deliberation, well written too, thanks.
Indeed, scenario’s a plenty !
Do not agree with your estimated outcomes for Pound as far as # 1 & 2 are concerned though.
Imho;
# 1; An extreme leaver – Bad for GBP ? Only as a knee-jerk reaction, afterwards (very) good for Pound.
# 2; An extreme remainer – Good for GBP ??? Only as a knee-jerk reaction, afterwards (very) bad for Pound.
Just my two peso’s, oops, pennies.
how is a remain scenario bad for cable? all the econ projections show that it’d be better for the UK econ if UK stays in the EU.
Hi Ars
Thanks for the kind words.
Can you give us some context on your analysis? Are you talking about from a trading point of view or from a fundamental/political aftermath point of view?
From a fundamental/(longer term) EZ economical/(geo) political p.o.v., trading point of view is just the resultante.
Simply put, I do not see any beneficial economical/political EZ development in the coming decade (and further) being it worth to being exposed to/being involved in/being part of/having to contribute to/ to the EZ/EC/”Bruxelles”.
My view on future continental Europe is extremely negative.
Opportunities are elsewhere for England (UK ?).
Understood AGP. That puts it in a better perspective.
My views here are really about the kneejerk/temporary reactions as they could be sizeable in themselves. I still feel that if we get to a point where the Brexit deal stands a chance of passing in Parliament, we’re going to see a big reaction in GBP.