What no-confidence vote means for Brexit and Pound?

The IMF estimates the leaving the EU without a transitional trade deal would cost UK about 6% of GDP equal to about four years of growth.
Sterling is set to depreciate towards 1.2100-1.1900 after Brexit deal will be ousted.
The opposition of UK Prime Minister May mounts with basically nobody happy with the current Brexit deal proposal.

Mario Blascak, PhD Independent Analyst

The Prime Minister Theresa May is in a crossfire in both her own Cabinet and in the UK parliament as she is trying to advocate the position of freshly agreed Brexit agreement. The Brexit agreement though seems unacceptable for most involved and the discontent in Theresa May’s Conservative party is on the rise.

The boiling atmosphere is detrimental for Sterling that is hammered lower as the UK Cabinet is dismantling with the Pensions Secretary Ester McBey and Brexit Secretary Dominic Raab leaving the Cabinet the day after the Brexit agreement text was presented.

Apart from that, there is a move towards a no-confidence vote to the UK Prime Minister with arch Brexiteer Jacob Rees-Mogg leading the opposition.

The procedure is that 15% of the Conservative party members of the parliament must submit the letter of no-confidence to the chairman of the 1922 Committee, in order to trigger a vote of no confidence in Prime Minister Theresa May government.

So what will happen after at least 48 members of parliament submitted a letter of no-confidence in the House of Commons? The House of Commons ousts the government saying "that this House has no confidence in HM Government".

The new government has to find the support in the UK parliament within 14 days, otherwise, the early General Election is called.

Getting a Brexit deal is crucial for the Pound that would depreciate substantially after no-deal Brexit would materialize. This is the common ground for the market analysts as well as for the Bank of England Deputy Governor Ben Broadbent who said that “if we were to leave without a deal, likely you would see currency fall” while stressing that reaching the deal is still the most likely outcome.

While Theresa May still has plenty of time to try to convince the parliament on a Brexit deal, facing a no-confidence vote in the final stage of Brexit referendum is a “make it, or break it” situation for both the UK politics and Sterling with Sterling seen testing post Brexit referendum lows of 1.2100 as the IMF estimated a loss of about 6% of GDP after the UK would leave the European Union with no transition deal.

Author

Mario Blascak, PhD

Independent Analyst

Dr. Mário Bla&scaron;čák worked in professional finance and banking for 15 years before moving to journalism. While working for Austrian and German banks, he specialized in covering markets and macroeconomics.

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