UK: Vote of no confidence? – Deutsche Bank

According to analysts at Deutsche Bank, all eyes now are on whether or not we’ll get a vote of no confidence for PM May.

Key Quotes

“The remarkable 3 hour Parliamentary session yesterday left you feeling in no uncertain terms that the Withdrawal Agreement (WA) is highly unlikely to pass in its current form. However, before we even get there, the leadership challenge is the next hurdle.”

“Overnight, the Telegraph reported that the DUP will scrap its coalition with the Conservatives unless/until PM May is replaced. This would be materially negative news for the embattled PM and for markets, but the pound traded flat amid thin overnight liquidity.”

“The last twenty four hours have illustrated that there is seemingly no parliamentary majority for the current WA. At the same time, there is little prospect of further negotiation with the EU27, given the limited timeline.”

“There are two other options perhaps. One is a pivot towards a much softer form of Brexit – such as EEA membership plus a permanent customs union – however it’s not clear if there’s sufficient time on the EU side to agree to this. The other is a second referendum. This in itself would likely split the Tory Party although it would likely gain parliamentary support. The difficulty will be deciding what question to pose to electors. Some suggest there might be two.”

“The DB house view remains that PM May is likely to stick with the current deal and attempt to weather the political storm.”