Top 3 Developments
‘I stand here not as the result of calculation’ – This morning, Michael Gove set out his stall for leadership of the Conservative Party. In a lengthy 13-page speech, he promised to be a radical reformer and improve Britain for all, including a pledged extra £100m a week for the NHS. However, the laughter following a comment about him not being there as a result of calculation showed that many are still put off by his ‘betrayal’ of both Johnson and Cameron. This feeling has been reflected in the odds, with Andrea Leadsom now taking over as second favourite to become leader
Osborne Abandons Surplus Plan – In a speech this morning, Chancellor George Osborne has abandoned his target to restore government finances to a surplus by 2020. He said that the UK economy is showing ‘clear signs’ of shock in the aftermath of the vote to leave the European Union, but that the way Government respond will ultimately determine the impact on jobs and growth.
McDonnell says Corbyn will face a challenge ‘in days’ – In a speech responding to the EU referendum result, Shadow Chancellor John McDonnell said that Jeremy Corbyn is likely to face a leadership challenge within days. In a departure from traditional Labour policies, he later said that Brexit would end freedom of movement and that during negotiations, the rights of UK financial services to carry out business across the EU needed to be maintained.
Conservative Party Update: Gove the ‘candidate for change’
The hustle and bustle of yesterday has calmed down today – slightly, but the infighting is still slightly alive. Ken Clarke, being interviewed on BBC Radio 4’s Today programme, called for Michael Gove to step aside from the leadership race, in what he termed the ‘bizarre manoeuvrings of Michael Gove’. However, Gove pushed ahead with his leadership bid – calling a press conference to set out his plan should he be elected leader of the Conservative Party. His plan included investing at least £100m extra a week in the NHS by 2020, introducing an Australian-style points system for immigration, and not triggering Article 50 this year. Gove’s announcement about the investment into the NHS raised eyebrows as the Leave campaign, which he was a central part of, seemed to promise during the campaign there would be £350 million for the country.
Right-winger Liam Fox also outlined his vision for the leadership of the Conservative Party by stating that there was no room for membership of the single market if it meant free movement of people. In terms of building support during the leadership race, Theresa May was endorsed by the Daily Mail, who called into question Gove’s actions in recent days. Also picking up support is Andrea Leadsom, who has been backed today by Arron Banks, the backer of Leave.EU, the campaign run by UKIP’s Nigel Farage, and is current second favourite with the bookies.
Away from the leadership race, George Osborne has said that due to Brexit the Government must abandon its plans for a budget surplus by 2020, which is something that a number of the leadership candidates have also called for.
Labour Update: McDonnell warns Corbyn of looming leadership challenge
The Shadow Chancellor and Corbyn loyalist, John McDonnell, acknowledged today that the Labour leader is likely to face a leadership challenge in the coming days. McDonnell added that he was disappointed with the behaviour of many Labour MPs and called for them to “calm down” and “behave responsibility”. Senior MPs Angela Eagle and Owen Smith are still rumoured to be considering leadership bids in the event that Corbyn fails to resign from his position.
McDonnell, giving a speech in response to the EU Referendum result, set out five guidelines which he stated should be followed in Brexit withdrawal negotiations: freedom of trade for UK businesses with the EU and for EU businesses with the UK; protection of residency rights for EU citizens living in the UK, and UK citizens living elsewhere in Europe; existing protections at work; the UK’s role in the European Investment Bank; and the rights of UK financial services to win business across the EU to be maintained.
Additionally, it has been reported today that approximately 60,000 people have joined the Labour Party in the last week, although it is unclear whether those who joined did so in support of or opposition to Jeremy Corbyn.
Markets continued their ‘Brexit rebound’ today despite the Chancellor’s announcement that targets to restore government finances to a surplus by 2020 were no longer realistic in a post-Brexit scenario.
The FTSE 100 has enjoyed strong gains in recent days, particularly thanks to investors’ appetite for so-called “Brexit bargains”, and ends the week in a stronger position than before the vote. However, as Westminster infighting continues apace it is clear that the UK has entered a period of policy uncertainty that is likely to impact investment flows and business confidence for some time to come.
Despite a partial recovery over the last few days, the impact on the FTSE 250, a better gauge of investor sentiment towards the UK, has been far more severe. The FTSE 250 ends the week almost 5% down from its pre-vote level.
Yesterday, Sterling reacted negatively to Mark Carney’s hint of a forthcoming cut to interest rates, and has remained flat today, down a further 0.08% against the dollar at the time of writing. Since polls opened on 23rd June, the value of the pound against the dollar has fallen by almost 11%, and by almost 9% against the Euro.
- FTSE 100 up 1.13%
- FTSE 250 up 1.19%
- France (CAC-40) up 0.86%
- Germany (DAX) up 0.99%
- Italy (FTSE-MIB) up 0.61%
- Spain (IBEX 35) up 1.29%
- Japan (Nikkei) up 0.68%
- Hong Kong (Hang Seng) up 1.75%
- US (Dow Jones) up 0.23% (market still open)
- US (Nasdaq) up 0.55% (market still open)
Today saw Slovakia begin its rotation as President of the Council, the EU budget being published, and the European Commission Trade Commissioner outline trade options for the UK post Brexit. Key updates from today are summarised below.
- EU Trade Commissioner Cecilia Malmstrom told the BBC that formal trade negotiations could not happen until the UK had actually left the EU and two possible options could be ‘a Norway style package’ or a ‘third country deal’, where trade will be based on World Trade Organisation rules until an agreement was reached (ie the Canada option).
- The European Commission published its delayed budget for 2017. The Commission plans to spend €157bn next year, approximately €9bn less than 2016. The reason for the delay was suspected to be that it would be ‘red meat’ for the Leave campaign.
- Slovakia Prime Minister Robert Fico outlined the objectives for the Slovakian Presidency (each country gets a 6-month rotation as President of the Council) at one of the most crucial periods of the bloc’s history. Announcing his priorities, he said more power should be returned to member states and that eastern European states were among the most pro-EU and should be better heard in Brussels.
- The Irish Minister for Europe has said that a border between Northern Ireland and the Republic would be ‘unacceptable’.
- German Finance Minister Wolfgang Schauble has apparently called on the EU to integrate further after Brexit, including a common asylum policy and common growth policies.
- A poll for German publication Der Spiegel found that 64% of Germans wanted more powers to be returned to Member States and 84% of Germans wish to remain in the EU.
Monday 4th July
- Conservative Party leadership contest: Hustings for MPs.
Tuesday 5th July
- Conservative Party leadership contest: Voting opens and the first ballot is counted, verified and announced. The bottom candidate drops out and the rest decide if they are still running.
- Cabinet Office Minister Oliver Letwin, who will head up the ‘Brexit Unit’ in the Civil Service, gives evidence to the Foreign Affairs Committee.
- Scottish First Minister Nicola Sturgeon hosts the ‘big six’ business organisations to discuss Brexit and its implications for Scotland.
- European Parliament discussion of outcomes of first European Council since Brexit vote.
Thursday 7th July
- Conservative Party leadership contest: Second ballot takes place with the results announced afterwards.
- House of Lords debate on the case for a second EU referendum.
Tuesday 12th July
- Conservative Party leadership contest: Third ballot with candidates. The one who comes last drops out and then the final two go to a ballot.
Friday 9th September
- Conservative Party leadership contest: New Conservative Party Leader / Prime Minister in place.
Sunday 2nd October – Wednesday 5th October
- Conservative Party Conference.