By Halo Financial Team
The Pound has emerged unscathed during two days of dramatic Brexit battles and political skirmishes and actually strengthened somewhat, settling down again as events unfolded.
Prime Minister survives no-confidence vote
On Wednesday 16th January, UK Prime Minister, Theresa May, survived a motion of no-confidence by 325 votes to 306 – a majority of 19. The 10 MPs from the Democratic Unionist Party (DUP), which backed the government, made the difference.
In contrast, on Tuesday 15th, the UK government suffered the biggest defeat ever, as MPs rejected Mrs May’s Brexit deal by a massive 432 votes to 202.
The next vote will be on Mrs May’s Plan B on Monday 21st January, it was revealed today.
Sterling edges higher
Despite a no-deal Brexit becoming more likely, Sterling strengthened against the US Dollar during Wednesday, rising from 1.27 to 1.285 interbank rates just ahead of the vote. And when the result of the vote was announced at around 7:00pm, it immediately improved even higher, toward 1.288, before slipping back to 1.287.
Markets want grandstanding to end
David Johnson, Halo Financial’s Founding Partner, says, “The Pound actually gained strength despite two tumultuous days in the House of Commons. Theresa May says she is looking for Britain to come together. That is what the markets are hoping will happen and that Britain can reach agreement with the EU. However, until then, the Pound is likely to continue to be volatile, but as the Brexit matter edges towards a conclusion of some form, the proximity of a degree of certainty is allowing the Pound to gain buying interest. ”
After the vote, Mrs May made an emergency statement saying she understood why the public might find the events of the last few days “unsettling”. She is striving to deliver the referendum outcome for the UK to leave the European Union. Now is the time to put aside self-interest.
“From the meetings taking place between senior government representatives on [17th January], including myself, and groups of MPs that represent the widest possible selection of views from across Parliament,” she says.
“In a historic vote in 2016 the country decided to leave the EU, in 2017, 80% of people voted for parties that stood on manifestos promising to respect that result.
“Now over two and a half years later it’s time for us to come together, put the national interest first and deliver on the referendum,”
Theresa May now has until Monday 21st January to present a Brexit Plan B to the House of Commons.
A ‘constructive spirit’?
The Prime Minister says she want to discuss an alternative approach to Brexit “in a constructive spirit” with opposition parties. But the Labour Party and Liberal Democrats say she must abandon some of her ‘red lines’ and rule out a no-deal Brexit. David Johnson observes, “While the Prime Minister has tried to do that, Leader of the Opposition, Jeremy Corbyn, says he won’t participate unless a No Deal Brexit is taken off the table. As any negotiator will know, you really shouldn’t rule anything out in case it weakens your position. So, this complicates the ongoing UK political discussions somewhat.”
The Scottish National Party wants Mrs May to consider extending Article 50 and holding a second referendum. But she says any new Brexit proposals have to “deliver on the referendum result.”
At least six possibilities are currently on the table, a revised agreement – either in a minor or major way – a no-deal Brexit, an extension of Article 50, a second referendum, another no confidence motion and a General Election.
Patrick King, Tax Partner at MHA MacIntyre Hudson, says that “this is all speculation for now and what remains certain is that the uncertainty will continue, meaning that businesses should to continue to plan for the worst case scenarios and make plans to deal with these. Whatever happens, as ever, businesses that are best prepared and able to move quickest will benefit the most (or suffer the least).
The view in Europe
It is expected that once Theresa May has decided upon a plan of action, she will head to Europe to meet leaders there. German Chancellor Angela Merkel says, “We believe it is up to the British side… “to tell us what happens next.” while French President Emmanuel Macron, urged Britain to be more realistic
European Union Brexit chief negotiator, Michel Barnier said the bloc was stepping up preparations for a disorderly “no-deal” Brexit.
No-deal Brexit ‘a catastrophe’
However, the lack of progress is exasperating business leaders. Virgin boss, Richard Branson, says, “As business leaders, we know the catastrophe a no-deal Brexit would cause for Britain. Theresa May should abandon red lines and work with other parties in the best interests of Britain.”
Time for politicians to unite
Mike Cherry, Federation of Small Businesses (FSB) National Chairman, says it is time for politicians to come together and urgently find a way forward from this alarming Brexit stalemate.
‘Small business confidence has plummeted’
“The UK is due to leave the EU in just ten weeks, and yet businesses still have no idea what kind of circumstances they should prepare for. Many small businesses would be adversely impacted by a chaotic no deal exit. It is vital that there is a transition period, to give smaller firms time to adapt to whatever the final outcome turns out to be.
“Small business confidence has plummeted to its lowest point since the wake of the financial crash. Four in ten expect performance to worsen over this quarter, two thirds are not planning to increase capital investment, and a third see lack of the right skills as a barrier to growth. That’s what political uncertainty does to business: it makes it impossible to plan, innovate and expand.
Entrepreneurs ‘adept at finding solutions’
“The UK’s talented entrepreneurs are adept at finding innovative solutions when overcoming challenges in their businesses. It’s time for politicians to show that kind of innovation, flexibility and can-do spirit to end the impasse and bring some certainty that there will be both time and support to plan for the future during a transition period.”
See more details of Tuesday’s historic Brexit vote and the effect it had on the Pound
Get in touch with a Halo Financial Currency Consultant if you are concerned about the current uncertainty.