May win fails to reduce Brexit uncertainty

Chris Scicluna

Theresa May won the Conservative Party confidence vote. But with 117 of her 317 MPs voting against her, the PM’s authority has been significantly weakened and the major divisions within her party have been laid bare. Arguably her victory  merely reflected the lack of a credible unifying candidate to replace her, as well as the late and delicate stage in the Brexit process, rather than any enthusiasm for her leadership. The MPs certainly provided no ringing endorsement for her Brexit deal.

Admittedly, the result means that May cannot be challenged from within her party for another twelve months. But before MPs voted this evening, she pledged not to contest the next scheduled General Election in 2022 as Party leader. That commitment, as well as her poor showing in the vote, will ensure that May’s opponents on the backbenches and within the Cabinet will continue to seek to undermine her, maintaining pressure on her to move aside as leader sooner rather than later.

More than anything, the number of MPs voting against the PM this evening highlights her vulnerability to further defeats in Parliament, even if the balance of opinion on Brexit within the House of Commons has not materially altered. Nevertheless, the result also arguably serves to highlight that there is no majority for a no-deal Brexit among MPs, with supporters of such an approach to be concentrated among those Tory MPs who voted against the PM.

While May can now travel to Thursday’s Brussels Summit without fearing an imminent Tory coup d’état in her absence, the draft conclusions prepared for the meeting reportedly suggest that her talks with EU leaders will result in no revision of the draft Withdrawal Agreement (WA), with the clarification or revision of the Political Declaration (PD) also likely to be cosmetic rather than substantive. And so, the PM looks firmly on course for defeat if and when her Brexit deal is finally re-submitted for a ‘meaningful vote’ in Parliament, supposedly (but by no means definitively) before 21 January.

A defeat in that meaningful vote would likely be followed by a Parliamentary vote of no-confidence, tabled by the Labour party. While some disgruntled Tory rebels and the Northern Irish DUP might be tempted to vote against the Government in such a vote, on balance we would still expect May’s administration to scrape through. However, that would then likely be followed by votes on further opposition (or cross-party) motions proposing alternative ways forward on Brexit – perhaps including a second referendum, or a rewriting of the PD to include a commitment to the UK remaining a member of both the Single Market and a Customs Union (the so-called Norway-style model), which may allow for some toning down of the language around the backstop in the WA (but not substantively).

Overall, therefore, despite today’s political soap opera, the likelihood of various scenarios for Brexit has probably not materially shifted. We still attach a probability of less than 50% to any one particular outcome, with the probability of a second referendum (40%) or orderly Brexit (45%) significantly greater than that of a disorderly ‘no deal’ Brexit (5%) or new general election (10%). And, of course, given the persisting uncertainty and scope for further political dramas ahead, we also fully expect sterling to remain highly volatile in the New Year.


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