A week on from surviving a vote of no confidence and her Brexit plans defeated, Theresa May is faced with another vote from her MPs on 29 January 2019, this time on her amended proposals for a Brexit deal.
Whilst few details have been revealed about her amended proposals, and Theresa May having ruled out a delayed Brexit deal (correct as of 21 January 2019), it seems that a no deal Brexit is the more likely scenario, and one that is mooted to trigger a 2019 recession for the UK.
How sterling reacted during the UK parliament Brexit deal vote
Source: Schroders. Refinitiv data for Euro Sterling exhange rate between 1900 and 2100 GMT on 15 January 2018 correct as at 16 January 2018.
Following the deal rejection, Sterling rose from €1.115 to €1.128 – this small rise in sterling against the US dollar and euro in recent days has suggested that the new amendments have raised hopes amongst investors that the UK will not leave the EU on 29 March. However, without approval of the current agreement, an exit without a deal will be the outcome.
According to Schroders, if a cross-party compromise cannot be reached, we are faced with the possibility of a further referendum or general election, both of which could affect future market stability. While many have called for a re-vote, it would be difficult to predict the outcome of a second referendum, partly because it would depend on the questions posed to the public. However, markets are fearing a general election as it raises the possibility of a Corbyn government, widely seen to be detrimental to the UK economy and markets.
According to Janet Mui, Global Economist at Cazenove Capital, the prolonged uncertainty is also likely to result in the Bank of England’s Monetary Policy Committee holding off further increasing interest rates; predictions of the next increase coming in May now look highly unlikely.
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