UK Finance Minister On Brexit Plan For Banks

“While the leadership contest raises uncertainty, we see only a 10% risk of a hard Brexit. However, the extra delay tilts the risks to the upside.”

Hermes Investment Management: ‘We are on track for a ‘no’ outcome’

Eoin Murray, head of investment at Hermes Investment Management: First and foremost we should recognise that this is not a vote of no confidence in the government, which would have triggered a general election, although that may still be forthcoming should opposition leader Jeremy find his courage.

“If anything, this move takes us a step closer to our base case, that we are on track for a ‘no’ outcome of one flavour (no Brexit deal) or the other (no Brexit). But there is plenty more in this to run.” ‘If Mrs May loses, Brexit will have to be delayed’

Fawad Razaqzada, market analyst at “A surprise defeat for the prime minister…could delay the Brexit process even further. But the pound is unlikely to go anywhere fast because Brexit uncertainty won’t go away even if the PM wins the confidence vote tonight.

READ MORE: Here’s who betting markets think could replace Theresa May as prime minister

“While it looks unlikely that the Prime Minister will lose tonight, nothing surprises me anymore when it comes to UK politics. But one thing is clear: if May loses, Brexit will have to be delayed – whoever the next prime minister might be, he or she will have to apply for an extension to Article 50 and push back the official exit date of 29 March. Indeed, it could take at least a month before a new PM is chosen.

“Even if May survives the confidence vote, it does not necessarily mean MPs will eventually back her Brexit plan despite any reassurances – written or otherwise – she might get from Brussels. So make no mistake about, uncertainty is here to stay well into the New Year.”

JCRA: ‘If, Theresa May wins, that would leave us back where we were on Monday’

Andy Scott, associate director at financial risk consultancy JRCA: “If, as looks likely, Theresa May wins tonight’s vote, that would leave us back where we were on Monday, but without the risk of a change of leader unless she resigns.

“If however she loses, there’s the risk of a Brexiteer becoming PM and a hard Brexit in March. This scenario would cause further weakness for Sterling due to the higher risks to the economy.

“Alternatively, if a former Remainer took the keys to Number 10, we would expect there to be a delay to Article 50 to allow time for further negotiations. This scenario would be relatively neutral for sterling which is currently dealing at historically weak levels against its major counterparts.”

CMC Markets: ‘It will lance a boil’

Michael Hewson, chief market analyst at CMC Markets: “Tonight’s vote doesn’t change the binary choice facing MPs between May’s deal and any other alternative, and in a perverse way tonight’s vote can be seen as a good thing as it will lance a boil that has been festering for a few months now.

“The unfolding political uncertainty might not be as high if we had an anyway coherent opposition, however even here sadly that is lacking which only adds to the overall feelings of uncertainty facing businesses across the UK.” ‘A new Tory leader could create a new General Election’

Neil Wilson, chief market analyst at “The question for the pound is not who the leader is per se, but what it means for Brexit. A new Tory leader, depending on who it is and what parliamentary support he or she can command, could create the necessary conditions for a new general election, a situation that would undoubtedly ramp up the political risk premium for UK assets.” We could see ‘a relief rally in the pound’

David Cheetham, chief market analyst at “Sterling has lost 1-2% against the dollar, euro and yen so far this week and given the level of negative developments this is a relatively muted depreciation. A move back to the post-referendum lows around the $1.20 mark, or even lower, can’t be ruled out if May is ousted but this isn’t the base-case scenario.

“It appears that Theresa May has more than a fair chance of winning the leadership contest and if she does by a significant margin it would serve to embolden her position and could well lead to a relief rally in the pound.”

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