UK: Things about to get tougher for PM May - BBH

Things are about to get tougher for UK Prime Minister May, who is carrying on as if the Tories still enjoyed a majority, explains the analysis team at BBH.  

Key Quotes

“The DUP is reportedly seeking an increase of about GBP2 bln in government spending on infrastructure and National Health Service for their support of a minority government (which means no ministerial portfolios for DUP MPs).  The Tories themselves seem to be jockeying for position behind the scenes to succeed May.  Depending on which report you read, Hammond, Davis, and/or Johnson are quietly maneuvering, not wanting to seem too eager.”

“Meanwhile, Labour and the Lib Dems are reportedly considering the more than 70-year old convention that the House of Lords refrains from blocking or significantly amending laws that implement the governing party's manifesto.  How can the Tory's manifesto now have the same gravitas as then the Tory's had a majority?”

“In addition to this fluid, yet fractured, political situation, we seemed to learn yesterday that the BOE Governor and its chief economist are odds about the outlook for the UK economy, and the urgency by which the accommodation provided last summer should be removed.  Haldane suggested he nearly voted for a hike last week.  That would have made it a four-four tie.  The odds of a rate hike before the end of the year have risen but does not appear to be the most likely scenario (still below 40%, interpolating from the OIS).  UK high frequency data in the run up to the next BOE meeting, which is in August, may have more impact in the market than is usually the case.”