The UK has been involved in a protracted series of discussions with the European Union (EU) over the shape of its exit from the bloc, culminating in the exit deal recently presented to Parliament by Prime Minister Theresa May. However, the compromise represented by this deal appears to please neither fans of the EU nor those wishing to leave and has led to further political turbulence.
In this video, with less than 100 days before the date set for the UK’s departure, I give my take on the latest developments.
Paul Markham (PM): Last week, Theresa May was victorious in a leadership election within her own Conservative party; however, it did leave some questions over her position, given that approximately a third of her MPs voted against her. In the aftermath of that she has further postponed the so-called ‘meaningful vote’ on her deal to leave the EU, and that has caused some consternation across the Parliament in the UK, which means that there have been several attempts to try to force the issue, not least recently the leader of the opposition Labour Party tabling a motion of no confidence in the prime minister personally, which I think we can view pretty much as political game playing, but it does show the extent to which Parliament wishes something to happen. In the next few weeks there may well be the opportunity for so-called testing the will of Parliament, and what that means is to have a series of non-binding votes to try to shake out exactly what the prevailing view and preferred options of Parliament are, with a view then to tailoring some form of bill which would then lead to the next step in the Brexit process.
Question: What happens next?
PM: So, in reality, although it is possible that the percentage chances of each of the options are shifting, the options as they stand haven’t really changed. They are the deal as it stands, which at this stage would have to be seen as fairly unlikely; another referendum, which has all sorts of questions from a constitutional perspective against it; a no-deal Brexit, which will see the UK leave the EU without any formal agreement and reverting to WTO [World Trade Organisation] rules; or a general election, and the rules of the Parliament here in the UK do mean that that’s a little bit more complicated and perhaps less likely than what the markets may be pricing in at this stage, but all options are still very much on the table.
Question: What are the implications for markets?
PM: So there has been some evidence in the recent past, certainly from the retail sector here in the UK, that there are signs of economic weakness starting to come around as a result of Brexit, not least some form of consumer weakness. We’ve seen the market continue to struggle, we’ve seen the currency certainly continue to struggle, and there is no reason to expect that to change meaningfully in the near term. However, one could make the case, perhaps, that sterling over the longer term may be rather undervalued, certainly given interest rate differentials, but at this point I would say that the market has been remaining pretty cautions around Brexit given the multiple potential outcomes and the uncertainty which is still evident.
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