brexit-update

 

 

Top 3 Developments

May storms ahead in first round ballot – Frontrunner Theresa May stormed to a resounding victory in the first round of the Conservative leadership election yesterday. May won the support of 165 MPs (50% of the Parliamentary Party), with both the eliminated Liam Fox and withdrawing Stephen Crabb giving their support to the Home Secretary.

Carney seeks to reassure markets amid sterling slide – On Tuesday Mark Carney sought to provide further reassurance to the UK economy. Carney slashed the capital requirements for UK banks enabling them to lend an extra £150bn. However, on Wednesday sterling hit a new 31 year low against the dollar.

Corbyn appoints new Shadow Cabinet – Despite continued pressure on his leadership, the Labour leader finally announced his full Shadow Cabinet. The new team includes several MPs who were elected in 2015 and a number who hold more than one post.

Conservative Party Update: May wins first round ballot

The primary focus this week continues to be on the Conservative leadership election. On Monday Boris Johnson gave his backing to Andrea Leadsom, who he said had ‘the zap, the drive, and the determination’ to be Prime Minister. All five candidates (May, Leadsom, Crabb, Fox and Gove) took part in a private husting in front of their colleagues on Monday. However, by Tuesday only three candidates remained following the first round of Parliamentary voting – result below:

  • Theresa May: 165
  • Andrea Leadsom: 66
  • Micheal Gove: 48
  • Stephen Crabb: 34
  • Liam Fox: 16

As Liam Fox came last he was automatically eliminated from the race. Stephen Crabb then withdrew saying ‘I think, given the seriousness of the situation, the quicker we have a new and strong Prime Minister in place, the better.’ Both Fox and Crabb then came out in support of May – putting her quite a way ahead of Leadsom. The final round of voting will take place on Thursday, which will whittle the list down to two candidates and then voted on by, roughly, 150,000 Conservative Party members. The new Prime Minister will be in place come 9th September.

 

How the Conservative candidates measure up

 

Candidate Where they stand
Andrea Leadsom Leave or Remain: Campaigned to leaveLeadsom’s Vision: She strongly believes that ‘the next leader is someone who has to deliver on the promise of the referendum’. She is putting herself forward as the ‘real, honest and down-to-earth candidate’.

 

·         She would push to trigger Article 50 as soon as she became Prime Minister.

·         She has promised to guarantee the rights of the EU citizens currently living and working in the UK. However, she has suggested that this should be reviewed for people entering the country after a certain date.

 

Snap General Election: She has ruled this out.

Theresa May Leave or Remain: Campaigned to remainMay’s Vision: She feels ‘Brexit means Brexit’ and the outcome of the referendum must be respected. She has set herself as the candidate to unite the country and party.

 

  • It must be a priority to allow British companies to trade with the single market in goods and services.
  • A need to regain more control of the number of people who are coming to the UK from Europe.
  • No longer seeks to produce a budget surplus by the end of the parliament. She also ruled out an emergency Brexit budget.
  • Would not trigger Article 50 this year.

 

Snap General Election: She has said that there would be no general election before 2020.

Michael Gove Leave or Remain: Campaigned to leaveGove’s vision: He has positioned himself as the candidate for change.

 

  • He would end free movement and introduce an Australian-style points system.
  • Would invest at least £100m extra a week in the NHS by 2020.
  • Hinted at a new deal with the Scottish Parliament.
  • Would not trigger Article 50 this year.

 

Snap General Election: He ruled this out.

Labour Update: Full Shadow Cabinet appointed amidst leadership uncertainty

The Labour Leader’s future remains uncertain following last week’s wave of resignations.

On Monday, Corbyn attempted to firm up his position through posting a video message to “talk directly” to Labour members in which he urged the party to unite to oppose the Conservative Government and reiterated that he would continuing in his post. However, former Shadow Business Secretary Angela Eagle has repeated that she is willing to stand against Corbyn if he refuses to resign following negotiations between leading Labour figures and the trade unions.

Many Labour figures have called for the unions to  broker a peace deal between the divided factions within the party and both Deputy Leader, Tom Watson and Corbyn met with them separately on Tuesday.

Tuesday also saw Corbyn finally unveil his full Shadow Cabinet, eight days after announcing his initial team. The new Shadow Cabinet includes a number of members holding joint roles, for example Dave Anderson MP as Shadow Secretary of State for both Northern Ireland and Scotland. Corbyn has come under some criticism for the composition of his new team, as only 40% of the team is female, despite the Labour Leader’s pledge that there would be 50:50 gender balance.

 

MPs criticise Head of Brexit Unit for lack of Government contingency planning

Oliver Letwin, the Cabinet Office Minister tasked with leading the so-called ‘Brexit Unit’ was roundly criticised during a hostile committee session yesterday. The Unit will examine all options and possibilities in a neutral way, setting out the costs and benefits to enable the next Government to make a decision on the UK’s future relationship with the EU.

Letwin fought off accusations that the Government had not planned adequately for a vote to leave the EU with committee member Crispin Blunt accusing the Prime Minister of a ‘dereliction of duty’.

Letwin claimed that although Government lawyers had said that the triggering of Article 50 was a matter for the Prime Minister and not Parliament, MPs would have a role to play in repealing the European Communities Act 1972 – the legislation that led to the UK joining the European Economic Community.

The issue of how Article 50 can be invoked is hotly contested, however, and Letwin said he believed that the matter will end up in the courts. Meanwhile, a legal challenge on behalf of a British citizen has been lodged which seeks to assert that only Parliament can authorise withdrawal from the EU under Article 50, a belief that is also shared by the London law firm Mishcon de Reya.

 

Market Update

Yesterday saw Mark Carney make renewed attempts to provide further reassurance to the UK economy. The Governor announced a range of measures including a reduction in the capital requirements for UK banks, enabling them to lend an extra £150bn.

However, despite these assurances, Brexit worries continue to rattle markets. Sterling today dropped to a new 31-year low, the FTSE 250 is now 10% below its pre-referendum levels, and market volatility looks set to stay for some time to come.

With Article 50 yet to be triggered, and in the absence of a clear timeline of precisely when it will be, the UK can expect a prolonged period of uncertainty. Furthermore, even once Article 50 is formally triggered, it seems unlikely that any concrete certainties will be produced until the very end of the two-year negotiating period. Investors waiting for certainty over the UK’s trading relationships with the rest of the world may then have to wait for said deal to be ratified by the other 27 members of the EU.

Property and bank stocks remain the worst off since the Brexit vote. Some banks have already started preparations to relocate, with Frankfurt, Paris and Dublin top of the list of likely beneficiaries. Furthermore, a string of major property funds (including Standard Life, Aviva Investors and M&G) have temporarily suspended trading in the wake of heightened uncertainty. This appears to have further spooked the markets. As time passes since the vote, the real economic impact of the referendum will become clearer. Post-vote economic data will likely paint a worrying picture of the health of the UK economy and volatility could get worse.

European Update

The referendum result continues to dominate the EU institutions and there was another debate on Brexit in the European Parliament as well as further pressure on European Commission President Juncker to stand down.

Juncker to the junk yard?

  • Brexit has bought into question whether European Commission President Jean-Claude Juncker can remain in post. The Czech Foreign Minister called for him to step aside last week and there is speculation the German Government may follow suit.
  • Central and Eastern European Governments have stated that his calls for ‘more Europe’ fuelled Euroscepticism and Angela Merkel is believed to be ‘furious’ over how he has dealt with the debt crisis, Mediterranean migration and Brexit.
  • This fits into a wider agenda around returning more power to the European Council – a policy which will be bought forward by the current Slovakian Presidency.

European Parliament – no negotiations without notification

  • European Council President Donald Tusk has said there cannot be any negotiations without notification (of Article 50) and Britain cannot enter the single market without accepting freedom of movement. This was echoed by several interventions from Portuguese, Swedish, Spanish and Czech MEPs demonstrating that there is an effort to show that leaving the EU is slow and complicated.
  • UKIP MEP Paul Nuttall argued strongly against this position, stating that a tariff war would be detrimental to both the UK and EU.
  • ECR Group Leader and leading Conservative MEP, Syed Kamall, said the Referendum should be a ‘wakeup call’ for the EU which needed to become more democratic. He also felt there was a need for ‘less Europe’.
  • Outgoing UKIP Leader Nigel Farage MEP gave a press conference saying he’ll miss being the ‘pantomime villain’ of the European Parliament, but will see out his term.
  • The Scottish National Party’s two MEPs may move away from the Greens-EFA group in order to distance themselves from other separatist movements (Catalan in particular).

Brexit impacting early French and German election campaigns

  • It was claimed this week that the referendum was timed partly to not coincide with French and German elections, but with both Francois Hollande and Angela Merkel are facing election next year.
  • Dealing with the Brexit crisis and growing domestic Euroscepticism will be major issues in the polls. The far right wing ‘Alternative for Germany’ party has pledged to hold a referendum on Germany’s EU membership.
  • Hollande has said Brexit won’t impact the future growth of the EU and has told Britain it needs to go quickly and not to ‘expect any favours’. He is hoping that a harsh demeanour will stave off a challenge from Marine Le Pen’s National Front.

Farage quits: UKIP Leadership race begins

Monday morning saw the shock resignation of Nigel Farage MEP Leader of UKIP. Farage, who became an MEP in 1999 and served two separate periods as leader, stated that his “political ambition had been achieved”, adding that he wanted his life back. Shortly after Farage’s statement, UKIP’s sole MP Douglas Carswell – who has repeatedly clashed with Farage – tweeted a smiley face emoji.

Reacting to the news on Tuesday, the President of the European Commission, Jean-Claude Juncker, described Farage and Boris Johnson as “retro-nationalists” and not patriots. He added “patriots don’t resign when things get difficult; they stay”.

The bookies’ favourite to succeed Farage is the Deputy Leader of UKIP, Paul Nuttall MEP.

Timeline

Thursday 7th July

  • Conservative Party leadership contest: Second ballot takes place leaving the final two candidates. The final two will then be put to a vote of the entire Party membership.
  • House of Lords debate on the case for a second EU referendum.

Friday 9th September

  • Conservative Party leadership contest: New Conservative Party Leader / Prime Minister in place.

Sunday 2nd October – Wednesday 5th October

  • Conservative Party Conference.

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